Company X is planning to deposit $1000 into a five year Certificate of Deposit (CD) which...

Company X is planning to deposit $1000 into a five year Certificate of Deposit (CD) which is paying an interest rate of 8% annually. How much will the CD balance be in five years?

a. $14,693.30

b. $1,469.33

c. $1,491.76

d. $14,917.60

Expert Solution

Balance of CD @ the end of 5 years would be $1,469.33 (b is the correct answer). Calculations below:

Year interest balance

$1,000

1 1000*8% = 80 = 1000+80= $1,080

2 1080*8% = 86.4 =1080+86.4 = $1,166.40

3 1166.4*8% = 93.31 =1166.4+93.31= $1,259.71

4 1259.71*8% = 100.78 =1259.71 +100.78 = $1,360.49

5 1360.49*8% = 108.84 =1360.49+108.84 = $1,469.33

jeff jeffy answered 2 years ago

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