Question

1. ABC Bank offers a certificate of deposit (CD), where you deposit money and are required to leaveit in the account for a set amount of time. You will be penalized if you withdraw your money fromit early. Suppose you want to deposit $6,000 in a 5-year CD where interest is accrued daily (1 year= 365 days).(a) How much money will you have in the account after 5 years if the APR is 2.12%? Round yourfinal answer to 2 decimals.(b) What is the annual percentage yield (APY) on this account? Round your final answer to 2decimals.

Answer 1

To calculate the ampount of money in the account after 5 years, we will use the formula:

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

where A is the final amount

P is the initial amount or principal

r is the rate

n is the number of times the interest is applied

t is the time in years

From the question,

P = $6000 r = 2.12/100 = 0.0212 t= 5 n=365

substitute the values ibto the formula and evaluate

`A=6000(1+(0.0212)/(365))^(365*5)_{}`
`A=6000(1+(0.0212)/(365))^(1825)`
`A=6670.91`

The amount is $6670.91

b)

To find the annual percentage yield (APY) on this account, we will use the formula:

`APY=(1+(r)/(n))^n-1`