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Nikola invested $6,000 in a 3-year Certificate of Deposit (CD) that pays 3.8% interest compounded annually. Which equation could be used to find the value of the CD after 3 years?

A) A=P(1+0.038)³
B) A=(0.038)(3)
C) A=(1+3.8)³
D) A=(1+0.038)³

1 Answer

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Final answer:

The correct formula to find the value of the Certificate of Deposit after 3 years is A = P(1 + r)^n. In this case, for a principal of $6,000 and a 3.8% interest rate compounded annually for 3 years, the equation is A = $6,000(1 + 0.038)^3.

Step-by-step explanation:

To find the value of a Certificate of Deposit (CD) after 3 years with a principal of $6,000 and an annual interest rate of 3.8%, compounded annually, the correct equation is A = P(1 + r)^n, where A is the amount of money accumulated after n years, including interest, P is the principal amount (the initial amount of money), r is the annual interest rate (decimal), and n is the number of years the money is invested.

Applying the formula, the equation to use would be A = $6,000(1 + 0.038)^3. This means you take the principal amount of $6,000, multiply it by 1 plus the interest rate of 0.038 (3.8%), and then raise this to the power of 3 (the number of years the money is invested).

Thus, the correct option from the choices given is A) A = P(1 + 0.038)^3.

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