One bank advertises an interest rate on a certificate of deposit (CD) with a 5.6% effective...

One bank advertises an interest rate on a certificate of deposit (CD) with a 5.6% effective annual rate. If $1000 were invested in this CD today, what would be the future value in 5 years? Report the answer to at least 4 significant figures.

Expert Solution

Future Value

= Present Value x ( 1 + Rate of interest) ^ Number of periods

Where, Present Value = $1,000

Rate of interest = 5.6% or 0.056

Number of periods = 5 annual periods

So, Future Value

= $1,000 x ( 1.056 ^ 5)

= $1,000 x 1.313165

= $1,313.1659

jeff jeffy answered 2 years ago

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