On January 1, 2012, Peter Piper Invested in Two Series

question 48

Essay

On January 1, 2012, Peter Piper invested in two series HH bonds. Bond No. 1 was issued in the name of Peter and his son as co-owners. Bond No. 2 was issued in the name of Peter's son, although Peter was named as the sole beneficiary. In 2012, Bonds No. 1 and No. 2 paid interest of $2,000 and $1,000, respectively. What is the amount of interest income to be reported by Peter and by his son for 2012?

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Definitions:

Compounded Annually

Interest calculation on the principal and the accumulated interest once a year.

Annual Payments

Payments made once every year towards a debt or investment.

Future Value

The value of an asset or sum of money at a specific future date, calculated by applying expected rates of growth or interest.

Compounded Monthly

Interest calculation method where the interest is added to the principal each month, and the total becomes the principal for the next calculation.