Question

Lori buys a $459 certificate of deposit (CD) that earns 5.6% interest that compounds monthly. How much will the CD be worth in 6 years? (Express your answer rounded correctly to the nearest cent!)

Answer 1

Lori buys a $459 certificate of deposit (CD) that earns 5.6% interest that compounds monthly.

Compound interest formula is

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

P = principal amount

r = annual rate of interest

t = number of years

A = amount of money after n years, including interest.

n = number of times the interest is compounded per year

Given P = 459

r= 5.6% = 0.056

t = 6

compounded monthly means n = 12

Plug in all the values in the formula

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

`A=459(1+(0.056)/(12))^(12*6)`

`A=459(1.00467)^(72)`

A= 456* 1.3982456

A= 637.60

CD will be $637.60 worth in 6 years