Question

A recent high school graduate received $700 in gifts of cash from friends and relatives. In addition, he received three scholarships in the amounts of $250, $400, and $1500. If he takes all his gift and scholarship money and invests it in a 36-month CD paying 4% interest compounded daily, how much will the graduate have when he cashes in the CD at the end of the 36-months?

Answer 1

Remember that

The compound interest formula is equal to

$A=P(1+\frac{r}{n})^{nt}$

where

A is the Final Investment Value

P is the Principal amount of money to be invested

r is the rate of interest  in decimal

t is Number of Time Periods

n is the number of times interest is compounded per year

in this problem we have

P=(700+250+400+1,500)=$2,850

n=365

r=4%=0.04

t=36 months=3 years

substitute in the formula

$\begin{gathered} A=2,850(1+\frac{0.04}{365})^{365\cdot3} \\ A=\ 3,213.34 \end{gathered}$

The answer is $3,213.34