Question

Emilee put 3000 in a 2 year cd paying 4% interest, compounded monthly. After 2 years, she withdrew all her money. What was the amount of the withdrawal?

Answer 1

3,000×(1+0.04÷12)^(24)
=3,249.43

Answer 2

3249.43

Explanation:

The monthly compound interest can be determined from the following formula:

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

Where A is the final amount after interest, P is the intital amount invested, r is the interest rate, n is number of times interest is compounded per year, and t is the time in years.

We need to express rate as abn equivalent decimal number:

`4/100=0.04`

∴
`A=3000*(1+0.04/12)^(12*2)=3249.43`