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Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually. How much will you have when the CD matures?

Respuesta :

elcharly64

Answer:

The future value of the investment will be $3,754

Explanation:

Future Value of Investment

Suppose we have a principal P invested for a period of n years at an interest rate i compounded annually. The final value or future value FV of the investment can be computed by:

[tex]FV=P(1+i)^n[/tex]

The case we are considering consists of a present value P=2,000 that will be used to purchase a n = 10-year certificate of deposit (CD). It pays i=6.5% interest. When the CD matures, 10 years from now its value will be

[tex]FV=2,000(1+0.065)^{10}[/tex]

[tex]FV=2,000\cdot 1.877=3,754[/tex]

The future value of the investment will be $3,754

Tundexi

The amount that we will have when the CD matures will be $3,754.

Given data

Present value P =2,000

Years = 10-year certificate of deposit (CD).

6.5% interest.

Future value = P(1+i)^n

Future value = $2,000 (1+0.065)^10

Future value = $2,000 * 1.87

Future value = $3,754

In conclusion, the amount that we will have when the CD matures will be $3,754.

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