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25 June, 14:50

Jill bought a cd for $1000 that earns 4.2% apr and is compounded monthly. The cd matures in 2 years. How much will this cd be worth at maturity?

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  1. 25 June, 16:19
    0
    The value at maturity will be given by compound formula given by:

    FV=P (1+r/100*n) ^n*t

    where:

    FV=future value=value at maturity

    p=principle

    r=rate

    n=number of terms

    t=time

    Thus plugging our values in the formula we get:

    P=$1000; r=4.2, t=2 years, n=12 terms

    FV=1000 (1+4.2/12*100) ^2*12

    FV=1000 (1+0.0035) ^24

    FV=1087.469396

    Thus the value at maturity will be $1087.469396
  2. 25 June, 18:04
    0
    A = P (1+r/12) ^12t, where A = amount after two years, P = Initial amount = $1000, r = apr = 4.2% = 0.042, t = period = 2 years

    Then,

    A = 1000 (1+0.042/12) ^12*2 = $1087.47
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