Question

Yvette wants to have $650,000 when she retires in a year. If she currently has$600,000 to put in a 1-year CD, which APR and compounding period will allowher to reach her goal?A. An APR of 8.02%, compounded monthlyB. An APR of 8.01%, compounded dailyO C. An APR of 8.03%, compounded quarterlyO D. An APR of 8.04%, compounded semiannually

Answer 1

Option C (8.03% APR, compounded quarterly) will allow Yvette to reach her goal of $650,000.

Step-by-step explanation:

In order to determine which APR and compounding period will allow Yvette to reach her goal of $650,000, we can use the formula for compound interest:

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

Where:

• A is the future value of the investment (goal amount)
• P is the present value of the investment ($600,000)
• r is the annual interest rate (apr)
• n is the number of times interest is compounded per year (compounding period)
• t is the number of years

Let's calculate the future value for each option:

1. An APR of 8.02%, compounded monthly:
   A = 600,000(1 + 0.0802/12)^(12*1) ≈ $648,702.30
2. An APR of 8.01%, compounded daily:
   A = 600,000(1 + 0.0801/365)^(365*1) ≈ $649,715.55
3. An APR of 8.03%, compounded quarterly:
   A = 600,000(1 + 0.0803/4)^(4*1) ≈ $650,399.53
4. An APR of 8.04%, compounded semiannually:
   A = 600,000(1 + 0.0804/2)^(2*1) ≈ $650,805.51

Based on these calculations, option C (8.03% APR, compounded quarterly) will allow Yvette to reach her goal of $650,000.