Answered

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1. ABC Bank offers a certificate of deposit (CD), where you deposit money and are required to leaveit in the account for a set amount of time. You will be penalized if you withdraw your money fromit early. Suppose you want to deposit $6,000 in a 5-year CD where interest is accrued daily (1 year= 365 days).(a) How much money will you have in the account after 5 years if the APR is 2.12%? Round yourfinal answer to 2 decimals.(b) What is the annual percentage yield (APY) on this account? Round your final answer to 2decimals.

Sagot :

To calculate the ampount of money in the account after 5 years, we will use the formula:

[tex]A=p(1+\frac{r}{n})^{nt}[/tex]

where A is the final amount

P is the initial amount or principal

r is the rate

n is the number of times the interest is applied

t is the time in years

From the question,

P = $6000 r = 2.12/100 = 0.0212 t= 5 n=365

substitute the values ibto the formula and evaluate

[tex]A=6000(1+\frac{0.0212}{365})^{365\times5}_{}[/tex][tex]A=6000(1+\frac{0.0212}{365})^{1825}[/tex][tex]A=6670.91[/tex]

The amount is $6670.91

b)

To find the annual percentage yield (APY) on this account, we will use the formula:

[tex]APY=(1+\frac{r}{n})^n-1[/tex]

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