Question

Florence Tyler invests $6,500 in a 4-year certificate of deposit that earns interest at an annual rate of 5 percent compounded daily. The amount per $1.00 is 1.221386 What is the interest earned ? Show work

Answer 1

Answer: $ $ 1439.0077 ( approx)

Explanation:

Since, the amount in the compound interest when interest is calculated daily is,

`A=P(1+(r/360)/(100))^(360n)`

Where P is the principal amount,

r is the annual interest rate,

n is the number of years,

Here, P = $ 6500

r = 5%

n = 4 years,

Therefore, the amount after 4 years,

`A=6500(1+(5/360)/(100))^(360* 4)`

`A=6500(1+(5)/(36000))^(1440)`

`A=6500* 1.22138579592`

`A=$ 7939.00767349`

Therefore, the compound interest after 4 years = 7939.00767349 - 6500 = 1439.00767349 ≈ $ 1439.0077