Question

A bank offers a cd that pays a simple interest rate of 2.5​%. how much must you put in this cd now in order to have ​$4000 for a graduation trip in 4 ​years?

Answer 1

To have $4000 for a graduation trip in 4 years with a CD that pays a simple interest rate of 2.5%, you must put approximately $3782.60 in the CD now.

Step-by-step explanation:

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

Principal Amount = Future Value / (1 + (Interest Rate * Time))

Here, the Future Value is $4000, the Interest Rate is 2.5% (convert it to decimal by dividing by 100, so it becomes 0.025), and the Time is 4 years. Plugging in these values, the calculation would be:

Principal Amount = $4000 / (1 + (0.025 * 4)) = $3782.60

Therefore, you must put approximately $3782.60 into the CD now in order to have $4000 for the graduation trip in 4 years.