Tracey deposits $5,000 in a five-year certificate of deposit paying 6% compounded semi-annually. How much will Tracey have at the end of the five-year period?
A) $6,720
B) $6,690
C) $6,596
D) $6,910

Question

Quizplus · Accepted Answer

The correct answer is A because the future value of the deposit can be calculated using the formula:FV = PV * (1 + r/n)^(n*t)where:PV is the present value ($5,000)r is the annual interest rate (6%)n is the number of times per year that the interest is compounded (2)t is the number of years (5)Plugging these values into the formula, we get:FV = 5000 * (1 + 0.06/2)^(2*5)= 5000 * (1.03)^10= $6,720

Tracey Deposits $5,000 in a Five-Year Certificate of Deposit Paying