Question

A bank CD has a yield of 12% per year, nominal annual rate, which is compounded monthly. If you deposit $10,000 in the fund, how much is it worth at the end of the 10 years. 22196.40 33003.87 21589.25 16386.16 O27070.41

Answer 1

To calculate the future value of the bank CD compounded monthly, we can use the formula for compound interest:

Future Value = Principal * (1 + (interest rate / number of compounding periods))^(number of compounding periods * number of years)

In this case, the principal (P) is $10,000, the interest rate (r) is 12% per year (or 0.12), the number of compounding periods (n) is 12 (monthly compounding), and the number of years (t) is 10.

Using the formula, we can calculate the future value:

Future Value = $10,000 * (1 + (0.12 / 12))^(12 * 10)
= $10,000 * (1 + 0.01)^(120)
= $10,000 * (1.01)^(120)
= $10,000 * 2.213872
= $22,138.72

Therefore, the correct option is 22196.40 (rounded to the nearest cent).