You deposit $5,000 into a 10-year bank CD that pays 6.5% annual compound interest rate. When the CD matures in 10 years, you will get more than $9,000 from it.

Question

Quizplus · Accepted Answer

According to the compound interest formula, the amount you will get after 10 years can be calculated as:

A = P(1 + r/n)^(nt)

Where:
A = the amount you will get after 10 years (future value)
P = the principal amount (initial deposit) = $5,000
r = the annual interest rate (as a decimal) = 6.5% = 0.065
n = the number of times interest is compounded per year = 1 (annual)
t = the time period, in years = 10

Plugging in the values, we get:

A = 5000(1 + 0.065/1)^(1*10)
A = 5000(1.065)^10
A = $9,449.23

Therefore, the statement is true. You will get more than $9,000 from the CD when it matures in 10 years.

You Deposit $5,000 into a 10-Year Bank CD That Pays