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4 September, 17:30

Lori gets an offer from another bank that is also paying 6% on CD's, but is compounding interest daily. How much will the $1500 CD be worth in:

18 months?

33 months

110.4 months

+2
Answers (1)
  1. 4 September, 20:16
    0
    Step-by-step explanation:

    We would apply the formula for determining compound interest which is expressed as

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

    Where

    A = total amount in the account at the end of t years

    r represents the interest rate.

    n represents the periodic interval at which it was compounded.

    P represents the principal or initial amount deposited

    From the information given,

    P = $1500

    r = 6% = 6/100 = 0.06

    Assuming there are 365 days in a year, then

    n = 365 because it was compounded 365 times in a year.

    1) For t = 18 months (18/12 = 1.5 years)

    Therefore,.

    A = 1500 (1 + 0.06/365) ^365 * 1.5

    A = 1500 (1.000164) ^547.5

    A = $1641

    2) For t = 33 months (33/12 = 2.75 years)

    Therefore,.

    A = 1500 (1 + 0.06/365) ^365 * 2.75

    A = 1500 (1.000164) ^1003.75

    A = $1768.5

    3) For t = 110.4 months (110.4/12 = 9.2 years)

    Therefore,

    A = 1500 (1 + 0.06/365) ^365 * 9.2

    A = 1500 (1.000164) ^3358

    A = $2601
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