Question

Future value (with changing years).  Dixie Bank offers a certificate of deposit with an option to select your own investment period. Jonathan has $9,500 for his CD investment. If the bank is offering a 3.5% interest rate, compounded annually, how much will the CD be worth at maturity if Jonathan picks a

a. three-year investment period?

b. five-year investment period?

c. ten-year investment period?

d.  fifteen-year investment period?

Answer 1

The future value is computed as follows:

= Present value x (1 + r)ⁿ

a. The amount is computed as follows:

= $ 9,500 x 1.035³

= $ 10,532.82 Approximately

b. The amount is computed as follows:

= $ 9,500 x 1.035⁵

= $ 11,283.02 Approximately

c. The amount is computed as follows:

= $ 9,500 x 1.035¹⁰

= $ 13,400.69 Approximately

d. The amount is computed as follows:

= $ 9,500 x 1.035¹⁵

= $ 15,915.81 Approximately