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Kelly invested $5,000 in a CD at Charter Bank. The annual rate is 4.9% compounded monthly. How much is her investment at the end of 8 years?

1 Answer

7 votes

Answer:

$7393.78

Explanation:

The formula for the value of Kelly's investment is ...

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

where P is the principal invested (5000), r is the interest rate (.049), and t is the number of years (8). n is the number of times per year interest is compounded. When compounding is monthly, n=12.

Filling in the numbers, we find ...

V = $5000·(1 +.049/12)^(12·8) ≈ $7393.78

Kelly's investment will be worth $7393.78 in 8 years.

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