Unit 5 Math 133 Discussion Board: a Grandmother Is Looking for a Long Range Investment for Her Grandchild.

Topics: Investment, Finance, Family, Credit history, Capital accumulation, Personal finance / Pages: 3 (528 words) / Published: Feb 3rd, 2012
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 Principle =P P=$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 T=10

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) N=1

Now I’ll put the assigned values in a simple column for easy reading going into the next step.

P=$25,000 R=0.0115 T=10 N=1

Step #5. Now we can apply these values to the formula F(t) = P(1 + r/n) nt

References: 2011 Bankrate Inc. Retrieved from: http://cdrates.bankaholic.com/?product=15&x=8&y=6&ec_id=m8011621 2011 Bankrate Inc. Retrieved From: https://www.bankoncit.com/calculators-savings.htm

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