Question

jill bought a cd for $1000 that earns 4.2% apr and is compounded monthly. The cd matures in 2 years. How much will this cd be worth at maturity?

Answer 1

The value at maturity will be given by compound formula given by:
FV=P(1+r/100*n)^n*t
where:
FV=future value=value at maturity
p=principle
r=rate
n=number of terms
t=time
Thus plugging our values in the formula we get:
P=$1000; r=4.2, t=2 years, n=12 terms
FV=1000(1+4.2/12*100)^2*12
FV=1000(1+0.0035)^24
FV=1087.469396
Thus the value at maturity will be $1087.469396

Answer 2

A = P(1+r/12)^12t, where A = amount after two years, P = Initial amount = $1000, r =apr = 4.2% = 0.042, t = period = 2 years

Then,

A = 1000 (1+0.042/12)^12*2 = $1087.47