Question

suppose that$22,700 is invested in a certificate of deposit for 1 year at 10.9% annual interest to be compounded semi-annually. How much interest will this investment earn? Round your answer to the nearest cent, if necessary. Note: 365 days in a year and 30 days in a month

Answer 1

$2541.72

Explanation:

$22700 is invested in a certificate of deposit for 1 year at 10.9% annual interest to be compounded semi-annually.

So, the semi-annual interest is
`(10.9)/(2) =5.45`%

If the invested amount is P and r% interest and compounded n times then the interest will become
`P[1+(r)/(100) ]^(n) -P`,

Therefore, in this case,
`22700[1+(5.45)/(100) ]^(2)-22700`

= 2541.72

So, the interest becomes $2541.72. (Answer)