Certificate of Deposit

Question: HELP! Alicia cox purchased a 2 ½ year Certificate Of Deposit for $15,000……?

The certificate earns interest at a rate of 5.75 percent compounded daily.
a.What is the amount of the certificate at maturity?
b.What is the total interest earned?

Interest earned = amount – original principal

annual yield = interest for one year / principal
2.Charles Demiaze purchased an 8-year Certificate Of Deposit for $45,000. The certificate earns interest 6.00 percent compounded daily.
a.What is the certificate worth in 8 years?
b.What has the certificate earned in those 8 years?

Answer: Alicia cox purchased a 2 ½ year Certificate Of Deposit for $15,000…
The certificate earns interest at a rate of 5.75 percent compounded daily.

Formula for Compounded Interest:

A = P * (1 + r/n)^(nt)
= $15,000 * (1 + 0.0575/360)^(360*2.5)
= $15,000 * (1.00015972)^900
= $15,000 * 1.15458
= $17,318.70

a. What is the amount of the certificate at maturity?
$17,318.70 (+/- a few cents due to rounding off)

b. What is the total interest earned?
$17,318.70 – $15,000
= $2,318.70

2. Charles Demiaze purchased an 8-year Certificate Of Deposit for $45,000. The certificate earns interest 6.00 percent compounded daily.

A = P * (1 + r/n)^(nt)
= $45,000 * (1 + 0.06/360)^(360*8)
= $45,000 * 1.0001667 ^ 2880
= $45,000 * 1.616164886
= $72,727.42

a. What is the certificate worth in 8 years?
= $72,727.42 (+/- a few dollars due to rounding off)

b. What has the certificate earned in those 8 years?
$72,727.42 – $45,000
= $27,727.42

CD Early Withdrawals , Penalties and Maturity Options