Question

Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 11.1% interest, compounded annually. How much will you have when the CD matures?

A. $6,818.95
B. $4,526.87
C. $6,303.23
D. $5,730.21
E. $7,105.46

Answer 1

To calculate the amount of money you would have when the CD matures, you can use the formula for compound interest.

Step-by-step explanation:

To calculate the amount of money you would have when the CD matures, you can use the formula for compound interest:

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

Where:

• A is the final amount of money
• P is the principal amount (initial investment)
• r is the annual interest rate (as a decimal)
• n is the number of times the interest is compounded per year
• t is the number of years the money is invested for

Plugging in the values from the question into the formula, we get:

A = $2,000(1 + 0.111/1)^(1*10) = $2,000(1.111)^10 ≈ $6,302.23

Therefore, the correct answer is C. $6,303.23