Asked by Scarlet Melliz on May 13, 2024
Verified
A $10,000 90-day term deposit earns 4.5% interest. How much will the depositor have at maturity?
A) $11,825.00
B) $10,110.96
C) $10,112.50
D) $112.50
E) $110.96
Term Deposit
A banking product where money is locked away for a certain period of time at a fixed interest rate.
Maturity
The time at which a financial instrument, investment, or insurance policy reaches its final value and the principal is repaid or returned.
Interest
The price paid for the opportunity to use borrowed finances, generally expressed through an annual percentage.
- Determine the maturity value of investments.
- Understand the relationship between interest rates, investment periods, and final payouts.
Verified Answer
MM
Mikhail MylesMay 15, 2024
Final Answer :
B
Explanation :
The interest earned on a $10,000 deposit at an annual rate of 4.5% for 90 days (a quarter of a year) is calculated as follows: Interest = Principal × Rate × Time = $10,000 × 0.045 × (90/365) = $110.96. Therefore, at maturity, the total amount = Principal + Interest = $10,000 + $110.96 = $10,110.96.
Learning Objectives
- Determine the maturity value of investments.
- Understand the relationship between interest rates, investment periods, and final payouts.