Question

Michael deposits $10,000 into a certificate of deposit that carns an annual

interest rate of 3.5% for a term of five years. How much interest will he earn at
the end of the term?
I

Answer 1

Answer: About $11,905.20

Explanation:

We can use the compound interest formula to help us solve this question. In the formula, A is the final amount, P is the initial starting balance, r is the interest rate as a decimal, t is the time period, and n is the number of times the interest is applied.

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

We will substitute our known values and solve for A. Note that a percent divided by 100 becomes a decimal. Then we will simplify.

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

`\displaystyle A=10,000(1+(0.035)/(5))^((5)(5))`

`\displaystyle A=10,000((5.035)/(5))^(25)`

`\displaystyle A= \$11,905.2018684, A \approx \$11,905.20`