Final answer:
The Thompsons save $4,500 annually, invest $2,700 in a one-year CD, earn $310.50 interest, and have an end value of $3,010.50 for the CD if the interest is reinvested.
Step-by-step explanation:
To answer the questions about the Thompsons' savings and investments, we can start by calculating each value step by step based on their annual income and the percentages provided.
(a) How much do the Thompsons save each year?
The Thompsons save 9% of their $50,000 annual income, which can be calculated as follows:
Annual Savings = Annual Income × Savings Percentage
Annual Savings = $50,000 × 0.09
Annual Savings = $4,500
(b) How much did they invest in a one-year CD?
They invested 60% of their savings in a one-year CD, which we calculate as:
CD Investment = Annual Savings × Investment Percentage
CD Investment = $4,500 × 0.60
CD Investment = $2,700
(c) How much interest did the CD earn in one year?
The CD earns 11 1/2% annual interest. To find the interest earned, use the formula:
Interest Earned = CD Investment × Interest Rate
Interest Earned = $2,700 × 0.115
Interest Earned = $310.50
(d) If they left the interest with the CD, what was its value at the end of the year?
By adding the interest to the initial investment, we get the end value of the CD:
End Value of CD = CD Investment + Interest Earned
End Value of CD = $2,700 + $310.50
End Value of CD = $3,010.50