Question

Citigroup Bank offers its clients a 2-year CD at an annual rate of 4.25% compounded continuously. If you have $3,000 to invest, compute the amount the CD would be worth after the 2 years.

Answer 1

The value of the CD after 2 years would be approximately $3,266.73.

Step-by-step explanation:

To find the value of the CD after 2 years, we can use the continuous compound interest formula:

A = P * e^(rt)

Where:

A is the final amount,

P is the initial amount,

e is the base of the natural logarithm,

r is the interest rate, and

t is the time in years.

Plugging in the values:

A = 3000 * e^(0.0425 * 2)

A ≈ 3000 * e^(0.085)

A ≈ 3000 * 1.088911

A ≈ $3,266.73

So, after 2 years, the CD would be worth approximately $3,266.73.