Question

To help pay for a class trip at the end of their senior year, the junior class at a high school invests $1600 from fund-raisers in a 18-month CD paying 3.3% interest compounded monthly Determine the amount the class will receive when it cashesin the CD after 18 months.The junior class will receive when it cashes in the CD(Round to the nearest cent as needed.)

Answer 1

SOLUTION

From the question, since the interest is compounded monthly, we will apply the formula

$A=P(1+\frac{r}{n})^{nt}$

Where A = the amount of money realized after the period = ?

P = the principal, that is the money invested = $1600

r = the interest rate = 3.3%

n = the number of times compounded in a year = 12

t = time interval = 18months = 1.5 years

So, this becomes

$\begin{gathered} A=P(1+\frac{r}{n})^{nt} \\ \\ A=1600(1+\frac{3.3}{100\times12})^{12\times1.5} \\ \\ A=1600(1+0.00275)^{12\times1.5} \\ \\ A=1600(1.00275)^{18} \\ \\ A=1600\times1.05067 \\ \\ A=1681.08\text{ dollars } \end{gathered}$