Problema Solution
Money invested in a certificate deposit(CD) earns interest once per year. Suppose you invest $4000 in a 2-year CD.
A. If the interest rate is 5% per year, the expression 4000(1+0.05)^2can be evaluated to find the total amount of money after two years. Explain the numbers in this expression.
B. find the amount at the end of two years
C. Suppose you invest $10,000 in a CD for 4 years at an at an annual rate of 6.25%. What is the total amount of money you will have after 4 years?
Answer provided by our tutors
A. If the interest rate is 5% per year, the expression 4000(1+0.05)^2 can be evaluated to find the total amount of money after two years. Explain the numbers in this expression.
$4000 is the principal
0.05 or 5% is the interest per period and in our case that is 1 year
2 = the number of compounding periods
B. find the amount at the end of two years
the amount at the end of two years is A = 4000(1+0.05)^2
A = $4,410
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C. Suppose you invest $10,000 in a CD for 4 years at an at an annual rate of 6.25%. What is the total amount of money you will have after 4 years?
A = 10000(1 + 0.0625)^4
A = $12,744.29
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the total amount of money you will have after 4 years is $12,744.29.