Mr. Clarence E. Harris
Unit 5 Math 133 Discussion Board
Grace is a grandmother who is looking for a long-range investment for her grandchild Elliott’s education. I searched the internet to find a Certificate of Deposit, which is a CD plan that earns compounded interest to invest her $25,000.
I used the advertised rates, the number of compounding periods per year and the time the funds will be invested, from the web site I researched to calculate the future value of her investment. Here is a step by step walk through of how I calculated Grace’s future investment.
Tip: You’re going to need a special calculator to apply your values and get the correct result. The calculator I used was at the following website:
Retrieved from https://www.bankoncit.com/calculators-savings.htm
Step #1. Was to apply the principle investment $25,000.
The principal is $25,000
Step #2. Was to apply the advertised annual interest rate for her investment. Remember to convert your percent to a decimal dividing it by 100
Use advertised annual interest rate from the website
Annual Interest Rate =r
Rate=1.15% /100=0.0115 r=0.0115
Step #3. Was to apply the time in years for the investment.
State the time in years for the investment.
Time in years = t
In this scenario we were not given the number of compounding periods a year. That means you’ll have to make it up.
Some options you may choose would be: Annual, Quarterly, Monthly or Daily. I chose annual because it made the math simple for me making the value for (n) #1.
Step #4. Was to apply the number of compounding periods per year. State Compounding Periods Per Year which will =(n)
Compounded Periods = 1 (Annual)
Now I’ll put the assigned values in a simple column for easy reading going into the next step.
Step #5. Now we can apply these values to the formula F(t) = P(1 + r/n) nt...
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