Question

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

Answer 1

The total interest earned is $1,439.

Explanation:

Consider the provided information:

Florence Tyler invests $6,500 in a 4-year certificate of deposit that earns interest at an annual rate of 5% compounded daily.

Now, Use the formula:
`A=P(1+(r)/(n) )^(nt)`

Where, A is the total amount (after adding interest), P is the principal (investment or loan), r is the interest rate, n is compound, and t is the time (in years).

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

`A=6500(1+(0.05)/(365) )^(4(365))`

`A=6500(1.00014)^(1460)`

`A=6500(1.22139)`

`A=7939.00918`

Therefore total interest earned is:

$7,939.00 - $6500 = $1,439.00

Hence, interest earned is $1,439.