Question

Gwen has $4,500 she would like to leave in a certificate of deposit (CD) while she is studying at a university. The bank is offering a rate of 2 percent on CDs. Use the Future Value Table in Figure 5-5 to help calculate the amount of interest she would earn if she put this amount in a CD for 4 years at an annual interest rate of 2 percent.

Answer 1

To calculate the interest Gwen would earn on a $4,500 CD for 4 years at a 2% interest rate, we can use the Future Value Table. The future value of the CD would be $4,869, so Gwen would earn an interest of $369.

Step-by-step explanation:

To calculate the amount of interest Gwen would earn on a $4,500 certificate of deposit (CD) for 4 years at an annual interest rate of 2 percent, we can use the Future Value Table. First, we need to find the factor for 4 years at 2 percent, which is 1.082.

Next, we can multiply the factor by the initial deposit of $4,500 to find the future value of the CD. Using the factor of 1.082, we get:

Future Value = Initial Deposit × Factor
Future Value = $4,500 × 1.082
Future Value = $4,869

Therefore, Gwen would earn an interest of $369 on her $4,500 CD after 4 years at an annual interest rate of 2 percent.