Question

Savanna Smiles invested $5,000 for one year in a CD that earns interest at a rate of 3.5% compounded monthly. What is the interest earned during the year? (Hint: Use the appropriate formulas and round at the end.)

Answer 1

We are asked to solve for the interest during the year given that it is compounded monthly, we are given with the formula A = P(1+r)^n. The solution is shown below:
A = P (1+r)^n
A = $5,000 (1+ 3.5/12)^(12*1)
A = $5,000 (1.000292)^12
A = $5,177.84