Question

Kyle has ​$1 comma 600 in cash received for high school graduation gifts from various relatives. He wants to invest it in a certificate of deposit​ (CD) so that he will have a down payment on a car when he graduates from college in five years. His bank will pay 1.7​% per​ year, compounded​ annually, for the​ five-year CD. How much will Kyle have in five years to put down on his​ car?

Answer 1

$1,740.70

Step-by-step explanation:

We need to calculate the future value of Kyle's five year CD:

future value = present value x (1 + interest rate)ⁿ

• present value = $1,600
• interest rate = 1.7%
• n = 5 years

future value = $1,600 x (1 + 1.7%)⁵ = $1,600 x 1.0879 = $1,740.70

Answer 2

Kyle will have $1,740.70 in five years' time to put down on his car as shown below

Step-by-step explanation:

The future value has been used to compute the worth of Kyle's investment in 5 years if invested at 1.7% compounded annually.

Future value=Present value *(1+r)^n

r=rate of interest=1.7%

n=number of years=5years

present value=principal invested =$1600

FV=$1600*(1+0.017)^5

FV=$1600*(1.017)^5

FV=$1600*1.0879395

FV= $1,740.70

In essence the worth of $1600 today is $1740.70 in five years.