Question

ANALYZE: On June 30, 2016, the company invested $20,000 in a certificate of deposit that will yield 12% interest at the end of one year?

Answer 1

To calculate the value of the CD at the end of the five years, use the formula for compound interest to find the final amount. Plugging in the values, the value of the CD at the end of the five years would be approximately $1,104.08.

Step-by-step explanation:

To calculate the value of the CD at the end of the five years, we can use the formula for compound interest:

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

Where:

• A is the final amount
• P is the initial principal (in this case, $1,000)
• r is the annual interest rate (in this case, 2%)
• n is the number of times the interest is compounded per year (in this case, once annually)
• t is the number of years (in this case, 5)

Plugging in the values, we get:

A = 1000(1 + 0.02/1)^(1 * 5)

A = 1000(1 + 0.02)^5

A = 1000(1.02)^5

A ≈ 1000 * 1.10408

A ≈ $1,104.08

So, the value of the CD at the end of the five years would be approximately $1,104.08.