Question

Suppose you deposit $1000 in a CD paying 5% interest, compounded monthly. How much will you have in the account after 10 years? Show your solutions

Answer 1

A = $1647.01

General Formulas and Concepts:

Pre-Algebra

• Order of Operations: BPEMDAS

Algebra I

Compounded Interest Rate Formula:
`A=P(1+(r)/(n) )^(nt)`

• A is final amount
• P is principle amount
• r is rate
• n is compounded terms
• t is time (in years)

Explanation:

Step 1: Define variables

P = 1000

r = 5% = 0.05

n = 12

t = 10

Step 2: Solve

1. Substitute:
   `A=1000(1+(0.05)/(12) )^(12(10))`
2. Divide:
   `A=1000(1+0.004167 )^(12(10))`
3. Add:
   `A=1000(1.004167 )^(12(10))`
4. Multiply:
   `A=1000(1.004167 )^(120)`
5. Exponent:
   `A=1000(1.64701)`
6. Multiply:
   `A=1647.01`