Question

Lori buys a $1500 certificate of deposit (CD) that earns 6% interest that compounds monthly. How much will the CD be worth in:

Answer 1

Answer:

$1500

6% interest

use the formula...

P(1+(r/100))^n

where P=initial amount

r=interest rate

t=time period elapsed

so ... for 5 years we get

$1500(1+(6/100))^5 = $1500(1.06)^5 = 2007.3383664

for 10 years

1500(1.06)^10 = 2686.271544814228043264

468 months = 39 years

1500(1.06)^39=14555.261231781943250017719606544

Answer 2

Answer:

Step-by-step explanation:

We would apply the formula for determining compound interest which is expressed as

A = P(1+r/n)^nt

Where

A = total worth of the CD at the end of t years

r represents the interest rate.

n represents the periodic interval at which it was compounded.

P represents the principal or amount of CD bought.

From the information given,

P = 1500

r = 6% = 6/100 = 0.06

n = 12 because it was compounded 12 times in a year.

The expression becomes

A = 1500(1+0.06/12)^12 × t

A = 1500(1+0.005)^12t

A = 1500(1.005)^12t

1) When t = 5 years,

A = 1500(1.005)^12 × 5

A = $2023.3

2) When t = 10 years,

A = 1500(1.005)^12 × 10

A = $2729.1

2) When t = 486 months = 486/12 = 40.5 years,

A = 1500(1.005)^12 × 40.5

A = $16935