Question

Consider the $50,000 excess cash.Assume that Gary invests the funds in a one year CD

a.What is the CD s value at maturity( future calue)if it pays 10 percent(annual) interest?

b. What will its future value be if the CD pays 5 percent interest? If it pays 15 percent interest?

Answer 1

By calculating interest at 10% for 1 year on CD
Interest = 50,000 * 10 * 1/100
Therefore future value = 50,000 + Interest
= 55000

Similary at 5%, future value is 52500
and at 15%, future valuer is 57500