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Ghella [55]
3 years ago
15

Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has ​$6,000 for his CD

investment.
If the bank is offering a 5​% interest​ rate, compounded​ annually, how much will the CD be worth at maturity if Jonathan picks a:
(a) two​-year investment​ period?
(b) five​-year investment​ period?
(c) eight-year investment​ period?
(d) twenty-year investment​ period?
Business
1 answer:
OlgaM077 [116]3 years ago
7 0

Answer:

The maturity value of certificate of deposit(CD) would be:

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

wherein, A= Amount

              P= Principal

              r= rate of interest compounded annually

              n= no of years to maturity

(a) two year investment plan:

   $6000 (1 + .05) (1 + .05) = $6615

(b) five year investment plan:

= $6000 (1\ +\ .05)^{5} = 6000 (1.2763) = $7657

(c) eight year investment plan:

= $6000 (1\ +\ .05)^{8} = $6000(1.4774) = $8865 approx.

(d) twenty year investment = $6000 (1\ +\ .05)^{20} = $6000 (2.6533) = $15,920 approx

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