Question

A recent high school graduate received ​$700 in gifts of cash from friends and relatives. In​ addition, he received three scholarships in the amounts of ​$350​, ​$400​, and ​$1200. If he takes all his gift and scholarship money and invests it in a 36​-month CD paying 2​% interest compounded daily​ (use nequals​360), how much will the graduate have when he cashes in the CD at the end of the 36​-months?

Answer 1

The value of the CD at the end of the five years is $1,104.08.

Step-by-step explanation:

To calculate the value of the CD at the end of the 5 years, we can use the compound interest formula:

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

Where:

A = final amount

P = principal amount (initial deposit)

r = annual interest rate (as a decimal)

n = number of times interest is compounded per year

t = number of years

In this case, the principal amount is $1,000, the interest rate is 2% (or 0.02 as a decimal), it is compounded annually (n = 1), and the time period is 5 years. Plugging in these values into the formula:

A = 1000(1 + 0.02/1)^(1*5) = $1,104.08

Answer 2

$ 2813.86

Step-by-step explanation:

PV ( present value) = $ 700 + $ 350 + $ 400 + $ 1200 = $ 2650

n = 360

t in years = 36 months / 12 months = 3

Fv ( future value ) = PV ( 1 + ( r/360) ^ (nt) = 2650 ( 1 + ( 0.02/360))^(3×360) = $ 2813.86

he will have $ 2813.86 at the end of the 36 months