Mark bought a CD for $500 that earns 3.9% APR and is compounded quarterly. The CD matures in 3 years. How much will this CD be worth at maturity?

Question

Braylon Herrera

Mathematics

8 January, 04:20

Mark bought a CD for $500 that earns 3.9% APR and is compounded quarterly. The CD matures in 3 years. How much will this CD be worth at maturity?

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Answers (2)

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Bruno Andrade · Answer 1

Bruno Andrade 8 January, 04:37

0

I got 561 I don’t really know

Ethen Garcia · Answer 2

First, we calculate for the effective interest rate.

ieff = (1 + 0.039/4) ^4 - 1

ieff = 0.039574

Then, the future worth of current amount is equal to,

F = P x (1 + ieff) ^n

where P is the current money and n is the number of years.

F = ($500) x (1 + 0.039574) ^5

F = $607.08