Your parents gave you $1,500 for your sweet 16th birthday. You want to deposit i
ID: 2703835 • Letter: Y
Question
Your parents gave you $1,500 for your sweet 16th birthday. You want to deposit it in a CD account that is earning 2% annually. Calculate how much your gift will be worth when you graduate from college on your 22nd birthday using the following methods:
a. Long-hand formula (Do not round intermediate calculations. Round final answer to 2 decimal places.) Your parents gave you $1,500 for your sweet 16th birthday. You want to deposit it in a CD account that is earning 2% annually. Calculate how much your gift will be worth when you graduate from college on your 22nd birthday using the following methods: Long-hand formula (Do not round intermediate calculations. Round final answer to 2 decimal places.) Reference table. Use Table A-1. (Round final answer to 2 decimal places.) Financial calculator (Round your answer to 2 decimal places.)Explanation / Answer
A) You get the answer by multiplying the initial amount of $1,500 dollars that you deposited into your checking account by the interest rate times the number of times it's compounded annually. In this instance, you will receive a total of 2% interest rate annually for your Checking Deposit account. Meaning that over the course of four years, from 16 to 22, you will have $1,689.243629 = $1.689.24 in your checking account.
B) Using the provided chart, you know that your interest rate will be applied for 6 years, so you look at the chart and you get the number, 1.1262 and you multiply this by $1,500 giving you $1,689.30 in your account.
C) Using the financial calculator do you get the total of $1,689.24 using the same process as in A.
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