Marcus wishes to invest $2500 in a 3-year CD that has an interest rate of 4.5% each year compounded twice a year. What will the CD be worth after 3 years (rounded to the nearest hundredth)?
A) $2946050.42
B) $2672.58
C) $2612.50
D) $2857.06
E) $2730.06

Question

Quizplus · Accepted Answer

The correct answer is D.The formula for compound interest is:A = P(1 + r/n)^(nt)where:A is the final amountP is the principal (initial investment)r is the annual interest raten is the number of times per year that the interest is compoundedt is the number of yearsIn this case, we have:P = $2500r = 4.5% = 0.045n = 2 (compounded twice a year)t = 3Plugging these values into the formula, we get:A = 2500(1 + 0.045/2)^(2*3)A = 2500(1.0225)^6A = $2857.06Therefore, the CD will be worth $2857.06 after 3 years.

Marcus Wishes to Invest $2500 in a 3-Year CD That