Suppose Antonio buys a CD for $500 that earns 3% APR and is compounded monthly. The CD matures in 1 year. How much will Antonio's CD be worth at maturity?

Question

asked Feb 5, 2020 231k views

2 Answers

Kerianne · Answer 1 · 2020-02-12T11:03:53+0000

Answer:

$515.21

Explanation:

Because you're compounding monthly, use the formula:

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

where A(t) is the amount after the compounding,

P = $500

r = .03 (always in decimal form!)

n = 12 (monthly is every month, and there are 12 months in a year) and

t = time in years

Filling in our given info:

$A(t)=500(1+(.03)/(12))^{(12)(1)$ which simplifies to

A(t) = 500(1 + .0025)¹² which simplifies to

A(t) = 500(1.0025)¹² which simplifies to

A(t) = 500(1.030415957) so

A(t) = $515.21