Question

Your birthday is next week and instead of other presents, your parents promised to give you $2,200 in cash. Since you have a part-time job and, thus, don’t need the cash immediately, you decide to invest the money in a bank CD that pays 9.80 percent, compounded quarterly, for the next two years. How much money can you expect to earn in this period of time? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)

Answer 1

Answer:

Interest revenue from the CD 470.04

Explanation:

we will calcualte the future value of the CD and from there calculate the interest:

$Principal \: (1+ r)^{time} = Amount$

Principal 2,200.00

time 8.00 (2 years x 4 quarter per year)

rate 0.02450 (9.8% divided by 4 quarter per year)

This divisions and multiplication are done to make time and rate be express i nthe same metric.

$2200 \: (1+ 0.0245)^{8} = Amount$

Amount 2,670.04

Now, we calculate interest revenue:

Amount - Principal

2,670.04 - 2,200 = 470.04