Question

9.
Diane Barvello deposits $1,380 in a certificate of deposit for 3 years.
Find the compound amount if the interest rate is 5% compounded daily.


$1,587.00

$1,603.31

$1,597.53

$1,603.32

Answer 1

Using Compound interest formula:

The exponential function for calculating the amount of money after t years, A(t), where P is the initial amount or principal, the annual interest rate is r and the number of times interest is compounded per year is n, is given by
$A(t) = p(1+ \frac{r}{n} )^{nt}$

from the given information:
p = 1,380 , r = 0.05 , t =3  and compounded daily ⇒⇒⇒ n =365

Amount after 3 years =
$A(t) = 1380(1+ \frac{0.05}{365} )^{365*3}$ = 1,603.315