Question

Suppose you buy a CD for $500 that earns 2.5% APR and is compounded quarterly. The CD matures in 3 years. How much will this CD be worth at maturity?

Answer 1

Answer:

A=$538.82

Step-by-step explanation:

We're going to use the compounded interest formula:

A=P(1+r/n)^n*t

Where,

A = the future value of the investment/loan, including interest

P = the principal investment amount (the initial deposit or loan amount)

r = the annual interest rate (decimal)

n = the number of times that interest is compounded per unit t

t = t is the amount of time at which you're checking how much it's worth (yrs)

Using this information, we can use:

A=500(1+0.025/4)^3*4

A=500(1+0.00625)^12

A=500(1.00625)^12

A=500(1.07763259886)

A=538.82

A=$538.82....