Question

Bridgette wants to have $325,000 when she retires in a year. If she currently has $300,000 to put in a 1 year CD, which of these APRs and compounding periods will allow her to reach her goal?

Answer 1

The answer to this question is C, 8.01% compounded daily

Answer 2

Answer:

Option C is the answer.

Step-by-step explanation:

The formula for compound interest is :

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

where A is the final amount,

p is the amount invested

r is the APR

n is the number of times compounded per year

t is the time in years

Now lets check the given options:

1.

$300000(1+\frac{0.0803}{4})^{4}$

= $324810.00

2.

$300000(1+\frac{0.0802}{12})^{12}$

= $324930.00

3.

$300000(1+\frac{0.0801}{365})^{365}$

= $325080.00

4.

$300000(1+\frac{0.0811}{2})^{2}$

= $ $324810.00

So, comparing all the values, we can see that if the APR is compounded daily, then the result is achieved.

Therefore, option C is the answer. An APR of 8.01% compounded daily.