Envision you have served as business manager for over two years. you noticed that for the last 12 months the business has regularly had cash assets of$20,000 or more at the end of each month.you have found a 6-month certificate of deposit that pays 6% compounded monthly.To obtain this rate of interest,you must invest a minimum of $2,000. you have also found a high interest saving account that pays 3% compounded daily.Based on the cash position of the business at this time,assume that you decide to invest $4,000.

Assume that you will invest the full amount in a certificate of deposit.
a.What would be the future value of the CD at the end of the investment term?

b.How much interest would the investment earn for the period?

c.What would be the effective rate of the investment?

Hi Kara,did you ever find the answer to this problem? I'm in the same boat at the moment.

To calculate the future value of the certificate of deposit (CD) at the end of the investment term, we need to use the formula:

Future Value = Principal * (1 + (Interest Rate / Number of Compounding Periods))^(Number of Compounding Periods * Investment Term)

In this case, the principal is $4,000, the interest rate is 6% (0.06 in decimal form), and the CD compounds monthly for 6 months. Let's calculate the future value:

Future Value = $4,000 * (1 + (0.06 / 12))^(12 * 6)
Future Value = $4,000 * (1 + 0.005)^(72)
Future Value = $4,000 * (1.005)^(72)
Future Value ≈ $4,243.44

Therefore, the future value of the CD at the end of the investment term would be approximately $4,243.44.

To calculate the amount of interest the investment would earn for the period, we subtract the initial investment amount from the future value:

Interest Earned = Future Value - Principal Investment
Interest Earned = $4,243.44 - $4,000
Interest Earned ≈ $243.44

Hence, the investment would earn approximately $243.44 in interest for the 6-month period.

To determine the effective rate of the investment, we use the formula:

Effective Rate = (1 + (Interest Rate / Number of Compounding Periods))^(Number of Compounding Periods) - 1

In this scenario, the interest rate is 6%, and it compounds monthly for 6 months. Let's compute the effective rate:

Effective Rate = (1 + (0.06 / 12))^(12 * 6) - 1
Effective Rate = (1 + 0.005)^(72) - 1
Effective Rate ≈ 0.0616 or 6.16%

Therefore, the effective rate of the investment would be approximately 6.16%.