Question

Lori buys a $672 certificate of deposit (CD) that earns 7.1% interest that compounds monthly. How much will the CD be worth in 14 years?

Answer 1

Answer:

The CD will be worth $1810.44 in 14 years.

Step-by-step explanation:

This is a compound interest problem:

The compound interest formula is given by:

$A = P(1 + \frac{r}{n})^{nt}$

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this exercise, we have:

$P = 672$

$r = 0.071$.

There are 12 months in a year, and so, 12 compoundings in a year. So $n = 12$.

We want to know the CD's worth in 14 years. So $t = 14$.

So

$A = P(1 + \frac{r}{n})^{nt}$

$A = 672(1 + \frac{0.071}{12})^{12*14}$

$A = 1810.44$

The CD will be worth $1810.44 in 14 years.

Answer 2

The formula is

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

A future value ?

P present value 672

R interest rate 0.071

N compounded monthly 12

T time 14 years

A=672×(1+0.071÷12)^(12×14)

A=1,810.45

Hope it helps!