You plan to invest an amount of money in five (5) year certificate of deposit (CD)...

You plan to invest an amount of money in five (5) year certificate of deposit (CD) at your bank. The stated interest rate applied to the CD is 12 percent, compounded monthly and paid out at the end of the five years. How much must you invest today if you want the balance in the CD account to be $30,000 in seven (7) years? (Hint:Need to adjust time and interest rate for monthly compounding - e.g., time is 84 periods, interest rate becomes ____%?)

$9,358

$10,332

$13,005

$11,009

Solutions

Expert Solution

	Investment today	FV×(1÷(1+r)^n)

	Here,

A	rate per annum	12.00%
B	Number of years	7
C	Number of compoundings per per annum	12
A÷C	rate per period ( r)	1.00%
B×C	Number of periods (n)	84
	Future value (FV)	$ 30,000.00

	Investment today	$ 13,005
		30000×(1÷(1+1%)^84)

jeff jeffy answered 1 year ago

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