You deposit $5,000 in a 5-year bank CD that pays 3% interest per year. How much will you get from this deposit be at maturity?

Question

Quizplus · Accepted Answer

The formula for calculating the maturity value (FV) of a CD is FV = PV x (1 + r/n)^(n*t), where PV is the present value (initial deposit), r is the annual interest rate, n is the number of times the interest is compounded per year, and t is the number of years.

In this case, PV = $5,000, r = 3%, n = 1 (interest is compounded annually), and t = 5 years. Plugging these values into the formula:

FV = $5,000 x (1 + 0.03/1)^(1*5) = $5,796.23

Therefore, the correct answer is C ($5,796).

You Deposit $5,000 in a 5-Year Bank CD That Pays