Question

9.

Diane Barvello deposits $1,380 in a certificate of deposit for 3 years.
Find the compound amount if the interest rate is 5% compounded daily.


$1,587.00

$1,603.31

$1,597.53

$1,603.32

Answer 1

To solve this we are going to use the formula for compounded interest:
`A=P(1+ (r)/(n))^(nt)`
where

`A` is the final amount after
`t` years

`P` is the initial amount

`r` is the interest rate in decimal form

`n` is the number of times the interest is compounded per year

`t` is the time in years

We know for our problem that
`P=1380`,
`r= (5)/(100) =0.05`, and
`t=3`. Since the interest is compounded daily, it is compounded 365 times in year; therefore,
`n=365`. Lets replace those values in our formula to find
`A`:

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

`A=1380(1+ (0.05)/(365))^((365)(3))`

`A=1603.31`

We can conclude the amount in Diane's after 3 years will be $1,603.31