Question

Graduation is 2 years away and you want to have $1250 available for a trip. If your bank is offering a 2-year CD (certificate of deposit) paying 4.3% simple interest, how much do you need to put in this CD to have the money for your trip?

Answer 1

To have $1250 available for a trip in 2 years, you need to put approximately $1150.92 in the CD with a 4.3% interest rate.

Step-by-step explanation:

To calculate the amount you need to put in the CD, you can use the formula:

A = P(1 + rt)

Where:

• A is the future value of the CD
• P is the principal amount you need to invest
• r is the interest rate expressed as a decimal
• t is the time in years

In this case, the future value (A) is $1250, the interest rate (r) is 4.3% or 0.043, and the time (t) is 2 years. So, the equation becomes:

1250 = P(1 + 0.043 * 2)

Simplify the equation:

1250 = P(1 + 0.086)

Combine like terms:

1250 = P(1.086)

Divide both sides of the equation by 1.086 to isolate P:

P = 1250 / 1.086

Use a calculator to find the value of P:

P ≈ $1150.92

Therefore, you need to put approximately $1150.92 in the CD to have $1250 available for your trip in 2 years.

Answer 2

To have $1250 in 2 years with a CD paying 4.3% simple interest, you need to deposit approximately $1150.09 initially.

Step-by-step explanation:

To calculate the initial deposit needed for a certificate of deposit (CD) to grow to $1250 in 2 years with a simple interest rate of 4.3%, we use the formula for simple interest: I = P × r × t, where I is the interest earned, P is the principal amount (initial deposit), r is the annual interest rate in decimal form, and t is the time in years. Since we want the final amount (A) to be $1250, we use the formula A = P + I and rearrange to solve for P. Thus, P = A / (1 + rt). Plugging in the values, we get:

• A = $1250
• r = 4.3% or 0.043 (in decimal form)
• t = 2 years

Now, we calculate:

P = $1250 / (1 + (0.043 × 2))

P = $1250 / (1 + 0.086)

P = $1250 / 1.086

P ≈ $1150.09

Therefore, you would need to deposit approximately $1150.09 in the CD to have $1250 available for your trip in 2 years.