Question
Isabella wanted to invest $2,500. She found a 6-year Certificate of Deposit (CD) that paid 3.25% compounded quarterly. How much will she receive at the
Isabella wanted to invest $2,500. She found a 6-year Certificate of Deposit (CD) that paid 3.25% compounded quarterly. How much will she receive at the end of 6 years when she redeems the CD?
Part a) (2 pts) Which formula is appropriate for this problem? (Simple Interest, Compound Interest, Savings Annuity, Payout Annuity, Monthly Payment on a Loan, Maximum Loan Amount, or one of the Mortgage-specific formulas, Future Value Needed (if making a one-time deposit), Future Value Needed (if making multiple deposits))
Part b) (5 pts) How much will Isabella receive at the end of 6 years when she redeems the CD?
- Write out
- 1) the correct formula with variables (e.g. P0, PN, N, r, etc.), and
- 2) the correct formula with the numerical values (round your answer to the nearest cent), and
- 3) write the answer in a complete sentence.
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