Question

Sal invested $5,000 in a three-year 3% CD with interest compounded monthly. What are the values for the following?

Select one:

a. Interest Rate Total Number
Per Compounding of Compounding
Period Periods
3% 12

b. Interest Rate Total Number
Per Compounding of Compounding
Period Periods
0.25% 12

c. Interest Rate Total Number
Per Compounding of Compounding
Period Periods
1% 36

d. Interest Rate Total Number
Per Compounding of Compounding
Period Periods
0.25% 36

e. Interest Rate Total Number
Per Compounding of Compounding
Period Periods
1% 12

Answer 1

The correct answer for Sal's investment is option d, with an interest rate per compounding period of 0.25% and a total of 36 compounding periods, reflecting the monthly compounding over three years.

option d isthe correct

Step-by-step explanation:

Calculating the future value of an investment with compound interest involves understanding the frequency of compounding along with the interest rate. For an investment like Sal's $5,000 3-year CD with interest compounded monthly, one would need to use the formula for compound interest to find the final amount.

1. The interest rate per compounding period is the annual rate divided by the number of compounding periods per year. In this case, the annual interest rate is 3%, so the monthly rate would be 3% / 12 = 0.25%.
2. The total number of compounding periods would be the number of years times the number of periods per year. Since the CD is for three years and interest compounds monthly, there would be 3 * 12 = 36 compounding periods.

Therefore, the correct answer for Sal's investment would be option d. Interest Rate Per Compounding Period: 0.25%, Total Number of Compounding Periods: 36. This reflects the conversion of the annual interest rate to a monthly rate and the total number of months over the three-year period.