Question

Mr. Perez invested $3,500 in a 7-year CD that pays 4.2% interest compounded annually. How much interest will the CD earn over the 7 years? *

Answer 1

A = $4,668.3

Interest = $1,168.3

Step-by-step explanation:

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

Where,

A = future value

P = principal = $3,500

r = interest rate = 4.2% = 0.042

n = number of periods = 1

t = time = 7 years

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

= 3,500(1 + 0.042/1)^1*7

= 3500(1 + 0.042)^7

= 3500(1.042)^7

= 3500(1.3338)

= 4668.3

A = $4,668.3

A = Principal + Interest

4,668.3 = 3,500 + I

4,668.3 - 3,500 = I

Interest = 1,168.3

Interest = $1,168.3