Kyle has $1 comma 600 in cash received for high school graduation gifts from various relatives. He wants to invest it in a certificate of deposit (CD) so that he will have a down payment on a car when he graduates from college in five years. His bank will pay 1.7 % per year, compounded annually, for the five-year CD. How much will Kyle have in five years to put down on his car?

Question

Business

Ace Stein

16 June, 17:11

Kyle has $1 comma 600 in cash received for high school graduation gifts from various relatives. He wants to invest it in a certificate of deposit (CD) so that he will have a down payment on a car when he graduates from college in five years. His bank will pay 1.7 % per year, compounded annually, for the five-year CD. How much will Kyle have in five years to put down on his car?

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Paityn Macdonald · Answer 1

Kyle will have $1,740.70 in five years' time to put down on his car as shown below

Explanation:

The future value has been used to compute the worth of Kyle's investment in 5 years if invested at 1.7% compounded annually.

Future value=Present value * (1+r) ^n

r=rate of interest=1.7%

n=number of years=5years

present value=principal invested = $1600

FV=$1600 * (1+0.017) ^5

FV=$1600 * (1.017) ^5

FV=$1600*1.0879395

FV = $1,740.70

In essence the worth of $1600 today is $1740.70 in five years.