Question

A certificate of deposit earns 0.75% interest every three months. The interest is compounded. What is the value of a $25,000 investment after 8 years?

Answer 1

Given that certificate of deposits earns 0.75% interest every three months, the value of $25,000 after 8 years will be:
A=P(1+r/100)^nt
where:
A=amount
P=principle
r=rate
t=time
n=number of terms
thus:
from the infomation
$25000, r=0.75%, t=8 years, n=12/3=4
thus
A=25000(1+0.0075/100)^(4*8)
A=25000(1.0075)^32
A=$3175.28

Answer 2

The value would be approximately $ 31,752.78

Explanation:

Since, the amount in compound interest is,

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

Where, P is the principal amount,

t is the number of years,

n is the compounded periods,

r is the rate per period,

Here, P = $ 25,000

t = 8 years,

n = 4 ( the periods of 3 month in a year is 4 )

r = 0.75 % = 0.0075

Hence, the value of the investment would be,

`A=25000(1+0.0075)^(4* 8)`

`=25000(1.0075)^(32)`

`=\$ 31752.7806079`

`\approx \$ 31752.78`