Question

0, Abigail deposits $4,000.00 in a certificate of deposit at a bank for 3 years at an interest rate of 8.36%compounded quarterly. Find (a) the value of the certificate at the end of the 3 years.

Answer 1

$5126.94

1) Gathering the data

Certificate (Present Value) = $4,000

Time = 3 years

Interest rate = 8.36%

Compounded quarterly n =4

2) Let's find the Future Value of that Certificate, by plugging into this formula the given data:

$\begin{gathered} F=P(1+\frac{r}{n})^{nt} \\ F=4000(1+\frac{0.0836}{4})^{4\times3} \\ F=4000(1.0209)^{12} \\ F=4000(1.28173557) \\ F=5126.94 \end{gathered}$

3) So 3 years after the deposit, Abigail's certificate is going to worth approximately $5126.94