Question

Yvette wants to have $650,000 when she retires in a year. If she currently has$600,000 to put in a 1-year CD, which APR and compounding period will allowher to reach her goal?A. An APR of 8.02%, compounded monthlyB. An APR of 8.01%, compounded dailyO C. An APR of 8.03%, compounded quarterlyO D. An APR of 8.04%, compounded semiannually

Answer 1

The formula for the compound interest is given as

$A=P(1+\frac{r}{n})^{nt}$

To check the value for the compounding at 8.01% daily

$\begin{gathered} A=600,000(1+\frac{8.01}{365000})^{365} \\ A=600000(1+0.00021945)^{365} \\ A=600000(1.00021945)^{365} \\ A=600000(1.083385881) \\ A=650,031 \end{gathered}$

By compounding the value at 8.02% monthly

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