Question

Kyle has ​$1 comma 000 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 1.5​% 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

$1077.283

Explanation:

When complete the first year the amount will be:

1000 * 1.015= 1015

1.015 because the rate is added to the initial amount, that is: 100%+1.5% = 1 + 0.015= 1.015

When complete the second year the amount will be the last year amount adding the rate interest:

1015*1.015=1030.225.

To the third year:

1030.225*1.015=1045.678

To the fourth year:

1045.678*1.015=1061.363

To the fifth year:

1061.363*1.015=1077.283