Asked by Eliza Howard on Jul 17, 2024
Verified
Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest,compounded annually.How much will you have when the CD matures?
A) $1,781.53
B) $1,870.61
C) $1,964.14
D) $2,062.34
Compounded Annually
The process wherein the interest earned on an investment is added to the principal at the end of each year, with future interest calculated on the new total.
- Utilize comprehension of financial calculations, notably present value, future value, and interest rates, in genuine scenarios.
Verified Answer
SP
sacquah productionsJul 20, 2024
Final Answer :
A
Explanation :
The amount at maturity can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($1,500), r is the annual interest rate (3.5% or 0.035), n is the number of times that interest is compounded per year (1, since it's compounded annually), and t is the time the money is invested for (5 years). Plugging in the values: A = 1500(1 + 0.035/1)^(1*5) = 1500(1.035)^5 ≈ $1,781.53.
Learning Objectives
- Utilize comprehension of financial calculations, notably present value, future value, and interest rates, in genuine scenarios.
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