2) A recent high school graduate received $ 700 ​

Question

2) A recent high school graduate received $ 700



in gifts of cash from friends and relatives. In addition,

sheshe

received three scholarships in the amounts of $ 350,$ 500 and $1000

if she takes her gift and schorlarship money and invest it in a 36 month CD paying 2%

interest compounded daily, how much will the graduate have when she cashes in the CDat the end of the 36 months?

The graduate will have

$nothing

Answer 1

You will need the compound interest formula.  A = P(1 + (r/n))^nt

 

P = principal (the initial amount you borrow or invest)

r = annual interest rate (in decimal)

n = the number of times the interest is compounded per year

t = the number of years the amount is borrowed or invested for

A = accumulation (the amount of money accumulated after n years with interest)

 

P = gifts + scholarships = $700 + ($350 + $500 + $1000) = $700 + $1850 = $2550

 

r = 0.02 (Divide 100 from 2 in order to convert from percent to decimal)

 

n = 365 (Daily means 365 days in a year)

 

t = 3 years (36 months is 3 years by using the conversion factor: 12 months = 1 year)

 

A = 2550 [1 + (0.02/365)]^(365*3) = 2550 [1 + (0.02/365)]¹⁰⁹⁵ = $2707.68