Question

Lori gets an offer from another bank that is also paying 6% on CD’s, but is compounding interest daily. How much will the $1500 CD be worth in:

a) 5 years?

b) 10 years?

c) 18 months?

Answer 1

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

P = $1,500

r = 0.06

n = 365 times per year

t = varies

so:
`A(t)=\$1500(1+(0.06)/(365))^(365t)=\$1500(1.00016438)^(365t)`

a) A(5) =
`\$1500(1.00016438)^(365*5) = \$2,024.73`

b) A(10) =
`\$1500(1.00016438)^(365*10) = \$2,733.01`

c) 18 months = 1.5 years, so:

A(1.5) =
`\$1500(1.00016438)^(365*1.5) = \$1,641.25`