Question

Trey Gorman invests $5,000 in a 1-year certificate of deposit that earns interest at an annual rate of 4% compounded monthly. The amount per $1.00 is 1.040742. How much interest will he earn at the end of one year? $203.71 $56.09 $2,142.00 $200.00

Answer 1

The amount of interest for $5000 investment that earns 4% per year such that 1$ is $1.040742 a the end of the year will be as follows:
A=P(1+r/100)^n
P=principple
r=rate
n=time
Thus
Amount at the end of the year will be:
A=5000(1+4/100)^1=5200
thus interest earned will be:
5200-5000
=$200