Question

Your birthday is next week and instead of other presents, your parents promised to give you $2,100 in cash. Since you have a part-time job and, thus, don’t need the cash immediately, you decide to invest the money in a bank CD that pays 5.40 percent, compounded quarterly, for the next two years. How much money can you expect to earn in this period of time? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.)

Answer 1

FV= $2,765.30

Step-by-step explanation:

Giving the following information:

Present Value (PV)= $2,100

Interest rate= 0.054/4= 0.0135

Number of periods= 2*4= 8 quarters

To calculate the future value, we need to use the following formula:

FV= PV*(1+i)^n

FV= 2,100*(1.0135^8)

FV= $2,765.30