Question

James put $1000 in a 2-year CD paying 7% interest, compounded monthly.

Answer 1

Answer with explanation:

Principal = $ 1000

Time = 2 years

Rate of Interest = 7 %

Since of rate of interest is compounded monthly,

then, $R=\frac{7}{12}\\\\T=2 \times 12 =24$

Amount after 2 years

 $=P\times [1 +\frac{R}{100}]^T\\\\=1000 \times [1+\frac{7}{1200}]^{24}\\\\=1000 \times [\frac{1207}{1200}]^{24}\\\\=1000 \times (1.00583)^{24}\\\\=1000\times 1.14972\\\\=1149.72$

Amount after 2 years, when rate of interest, is compounded monthly=$ 1149.72  

Answer 2

To find the future value of this investment the formula is
A=p (1+r/k)^kt
A future value?
P present value 1000
R interest rate 0.07
K compounded monthly 12
T time 2 years
A=1,000×(1+0.07÷12)^(12×2)
A=1,149.81