You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded annually, what...

You buy a 2-year, 8 percent savings certificate for $1,000. If interest is compounded annually, what will be its value at maturity?

a. $1,067.43

b. $1,166.40

c. $1,201.03

d. $1,396.57

e. $1,466.33

Expert Solution

We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.

A=1000*(1.08)^2

=1000*1.1664

=$1166.4

jeff jeffy answered 3 years ago

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