A CD, or "certificate of deposit," is a type of savings account with a fixed rate and term, meaning you can only redeem it when the term is over. If you bpen a CD with an initial deposit of $$ \$ 1500 $$ and an APR of $$ 0.15 \% $$ compounded monthly, what profit will you have earned when you redeem the CD in 5 years? Round your answer to the nearest cent, if necessary.

Question

UpStudy AI · Accepted Answer

To determine the profit earned from a Certificate of Deposit (CD) with the given parameters, we'll use the **compound interest formula**:

$$
A = P \left(1 + \frac{r}{n}\right)^{nt}
$$

Where:
- $$ A $$ = the amount of money accumulated after $$ t $$ years, including interest.
- $$ P $$ = the principal amount (\$1,500).
- $$ r $$ = annual interest rate (in decimal form).
- $$ n $$ = number of times interest is compounded per year.
- $$ t $$ = time the money is invested for in years.

**Given:**
- $$ P = \$1,500 $$
- APR ($$ r $$) = 0.15% or 0.0015 in decimal.
- Compounded monthly ($$ n = 12 $$).
- Time ($$ t = 5 $$ years).

**Plugging in the values:**

$$
A = 1500 \left(1 + \frac{0.0015}{12}\right)^{12 \times 5}
$$

$$
A = 1500 \left(1 + 0.000125\right)^{60}
$$

$$
A \approx 1500 \times 1.007527
$$

$$
A \approx \$1,511.29
$$

**Profit Earned:**

$$
\text{Profit} = A - P = 1511.29 - 1500 = \$11.29
$$

**Therefore, the profit earned after 5 years is approximately \$11.29.**
After 5 years, you will have earned approximately \$11.29 in profit.

Upstudy AI Solution

Answer

Solution

Bonus Knowledge

Related Questions

Latest Economics Questions