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Suppose you have $850 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

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facundobuzzetti

Answer:

FV= $772

Explanation:

Giving the following information:

Initial investment (PV)= $850

Interest rate (i)= 3.5% = 0.035

Number of periods (n)= 5 years

To calculate the future value (FV), we need to use the following formula:

FV= PV*(1+i)^n

FV= 650*(1.035^5)

FV= $772