Question

Miller's Bank is offering a new certificate of deposit (CD) with daily compounding and an annual interest rate of 4.65% for a term of 15 years. You have $10,000 to invest. What would be the final value of your investment? *

10 points

Answer 1

$20,086.35

Explanation:

To calculate the maturity value by compound interest, we will use the formula

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

where,

A = Maturity amount

P = Principal amount = $10,000

r = rate of interest = 4.65% = 0.0465

n = number of compounding periods = 365

t = time in years = 15 years

Now substituting the values,

`A=10,000(1+(0.0465)/(365))^((365)(15))`

=
`10,000(1+0.000127)^((365)(15))`

`=10,000(1.000127^(5475))`

= 10,000(2.008635)

= 20086.353758 ≈ $20,086.35

The final value of your investment would be $20,086.35.