Question

Graduation is 4 years away and you want to have $1150 available for a trip. If your bank is offering a 4 -year CD (certificate of deposit) paying 4.5% simple interest, how much do you need to put in this CD to have the money for your trip?

Answer 1

To have $1150 available for a trip in 4 years with a 4.5% interest rate, you need to put $6388.89 in the CD.

Step-by-step explanation:

To calculate how much you need to put in the CD, you can use the formula for simple interest: Interest = Principal x Rate x Time. Rearranging the formula, you can solve for the Principal: Principal = Interest / (Rate x Time). Plugging in the values, Interest = $1150, Rate = 4.5%, and Time = 4 years, you can calculate the Principal as follows:

Principal = $1150 / (0.045 x 4) = $6388.89