Question

Lori buys a $672 certificate of deposit (CD) that earns 7.1% interest that compounds monthly. How much will the CD be worth in 14 years?

Answer 1

The formula is

A=p(1+r/n)^nt

A future value ?

P present value 672

R interest rate 0.071

N compounded monthly 12

T time 14 years

A=672×(1+0.071÷12)^(12×14)

A=1,810.45

Hope it helps!

Answer 2

The CD will be worth $1810.44 in 14 years.

Explanation:

This is a compound interest problem:

The compound interest formula is given by:

`A = P(1 + (r)/(n))^(nt)`

Where A is the amount of money, P is the principal(the initial sum of money), r is the interest rate(as a decimal value), n is the number of times that interest is compounded per unit t and t is the time the money is invested or borrowed for.

In this exercise, we have:

`P = 672`

`r = 0.071`.

There are 12 months in a year, and so, 12 compoundings in a year. So
`n = 12`.

We want to know the CD's worth in 14 years. So
`t = 14`.

So

`A = P(1 + (r)/(n))^(nt)`

`A = 672(1 + (0.071)/(12))^(12*14)`

`A = 1810.44`

The CD will be worth $1810.44 in 14 years.