Lori buys a $1500 certificate of deposit (CD) that earns 6% interest that compounds monthly. How much will the CD be worth in:

5 years?

10 years?

486 months?

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 worth of the CD 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 amount of CD bought.

From the information given,

P = 1500

r = 6% = 6/100 = 0.06

n = 12 because it was compounded 12 times in a year.

The expression becomes

A = 1500 (1+0.06/12) ^12 * t

A = 1500 (1+0.005) ^12t

A = 1500 (1.005) ^12t

1) When t = 5 years,

A = 1500 (1.005) ^12 * 5

A = $2023.3

2) When t = 10 years,

A = 1500 (1.005) ^12 * 10

A = $2729.1

2) When t = 486 months = 486/12 = 40.5 years,

A = 1500 (1.005) ^12 * 40.5

A = $16935