Leslie deposit $3000 into a CD and is earning 5% interest , compounded quarterly. What will be the value of the CD after 10 years?

Question

Leslie deposit $3000 into a CD and is earning 5% interest , compounded quarterly.  What will be the value of the CD after 10 years?

Answer 1

Hi Sean,

 

In order to solve this problem, you need to use the compound interest formula A = P(1 + r/n)^nt. A stands for the final amount, P is the initial investment amount, r is the annual interest rate in decimal form, n is the number of times per year the interest is compounded, and t is the number of years. So for your problem, the equation would look like the following:

 

A = 3000(1 + .05/4)^4*10

A = 3000(1 + .05/4)⁴⁰

A = 3000(1 + 0.0125)⁴⁰

A = 3000(1.0125)⁴⁰

A = 3000(1.6436)

A = 4930.80

 

Hope this helps!

Answer 2

Depending on how far out you carry, the answer could be stated as:  $4.930.86.