Question

Kyle has $2,200 in cash received for high school graduation gifts from various relatives. He wants to invest it in a certificate of deposit (CD) so that he will have a down payment on a car when he graduates from college in five years. His bank will pay 2.6% per year, compounded annually, for the five-year CD. How much will Kyle have in five years to put down on his car?

Answer 1

Answer:

Kyle will have in five years from now 2,501.26 dollars for his investment on certificate of deposit.

Explanation:

We need to calcualte the future value of a lump sum:

$Principal \: (1+ r)^{time} = Amount$

Principal $ 2,200

time 5 years

rate 2.6% = 2.6/100 = 0.02600

$2200 \: (1+ 0.026)^{5} = Amount$

Amount 2,501.26