In August 2011, Netflix announced significant changes to its pricing plans. The new plans separate DVD-only subscriptions and streaming-only subscriptions, with each basic plan costing $7.99 a month. Previously, Netflix offered customers a basic combo plan for one DVD at a time and unlimited steaming that used to cost $9.99 and now will cost $15.98 a month.
You are an existing Netflix subscriber with the basic combo plan. You are furious that Netflix would demand a 60% price increase without adding any benefits to your plan, so you promptly cancel your Netflix subscription. You calculate the present value of your savings over 5 years to be $475.00. If you invest this amount in a 5-year bond that pays 8.5% interest compounded annually, how much interest on interest will you earn?