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4 November, 08:42

Ajax Company purchased a five-year certificate of deposit for its building fund in the amount of $220,000. How much should the certificate of deposit be worth at the end of five years if interest is compounded at an annual rate of 9%?

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  1. 4 November, 09:06
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    The certificate of deposit be worth $338496.8 at the end of five years if interest is compounded at an annual rate of 9%

    Explanation:

    Certificate of deposit of 220000 after 5 years @ 9% is calculated as below

    As per the Present and future value tables of $1 at 9% presented

    FVA of $ 1 after 5 years is 5.9847 and

    PVA of $ 1 after 5 years is 3.88965

    PV of 220000 will become = 220000*5.9847/3.88965

    = $338496.8

    Therefore, The certificate of deposit be worth $338496.8 at the end of five years if interest is compounded at an annual rate of 9%
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