Question
Find the future value of a $160,000 Certificate of Deposit that pays compounded interest every six months at the rate of 4% per year. The CD has a term of 5 years.
Calculate the FV (Future Value) using the “Future Value or Compound Amount of $1.00” table in your textbook.
Reminder: To use Table 13-1, you need to calculate the Number of Periods and the Interest Rate per Period.
Calculate the FV (Future Value) using the formula: FV = P(1 + R)N
Reminder: Always show work. You can do this by stating the values that you are substituting into the formula.
How much interest was earned on the investment?
Use either the result from Part 2a or Part 2b, since they are slightly different for your calculation.
TABLE 13-1 Future Value or Compound Amount of $1.00 Rate per period sses 100S00 101000 1.0ESCO 10000 00 1,0wo LOS 01000 100010 LS023 ID4040 WAesce:3 aliciM) SAV7123 LINIeLO003 1.10290 1.11301 1012525 11010t ums 1.1 1.13541 L19927 1.1STen E.2166S 1.318.1.7 LINLU uel 52 1Mv44 1.12e16 1.1swa 1.19405 1.22036 1,26592 Isms L34030 1.37u4 uass3 R07214 1,1OQsi 1.14sro 1.Esse9 3.22YK7 1.27224 1319 IMsos LA010 LAAM 04391 LIN360 3.Ht39 LI9509 1.24 1.20177 LM.W L42331 LAS610 133193 1.6t 10 SI l4 1,10462 1.16054 L2DRip 1.30s Luw2 L41060 1.4a04 Rs5297 t63ssa L70014 liseHO 1.11367 1.177US 1.34137 1.31No 1.38425 EASPT? 1.5IAL5 tA228s 1.71034 14 eor232 1.14947 1.23ns 131948 1A3y7 1.31259 1.6ssey 1.7) Ms LA3194 Lnws 21 09940 1.20X11 130end 1.ASeal LSusas LTss! a.922so 2 inss isnss sso nwas 1.11042 125239 LMX8 1.51387 tANSS LS6029 2.0SMI urn wa34 lass tests 2t 11190 124472 "LON6 1Mwsi.7237 1.936s0 211151 2ww2 2A1%S 2,R2526 1.34754 1.7Mel I,VTR99 2.Nh34 u6472 2.75217 107152 142615 129g26 aA127..187A42 L9029 21sa09 2.444m 271247 3.sass 3.5SS67 400113 222n9 253197 2ss.U7 125201 424440 84 anaE 2.3ses7 2711ss Allsas a 411644 472412 r:rzk0 11M23 114490 I.rss63 1.17723 LI LIV903 1.2 1.23210 177729 1.3m1 1.31293 13H00 twXI a4Ni LAi47 1.67710 1.72379 1.77 ISS ImNI ISO MJ 1.5LW Iaid78 3ASKS 1.71382 LT7014 Ieol LS755 Isan 20h36 LOSAB E76257 IA)846 LS1724 Ismx 2DKt36 217199 322 2.35 795 2"a04 mi 247823 2.54n4 2K3942 3.1050 22non 24 1487 257275244 2 19 3.13140 3.34173 LeasS- 9.79730 U9044 4SS711 2 57184 l41 6.assee 736295 8.14027 29187 487770 S4234 3 &Dssa; e 4,Moss 5.041 621387 7D47ya T 114 65277 12.17218 13.Iwss 13. Table shows future value of S1.00 compounded for Nperiods at Rrate per period.
Explanation / Answer
we know that FV = PV*(1+r)^N , where
r = 0.04
n= 10 , as the interest is compunded every 6 months
and PV 160000 , so putting the values
we see the value as 160000*(1.04)^10 = 236839
Interest earned = FV-PV = 236839-160000= 76839
