Posted by **Ruth** on Thursday, February 2, 2012 at 11:25pm.

The formula for calculating the amount of money returned for an initial deposit into a

bank account or CD (certificate of deposit) is given by

nt

n

r

P A „Ê„Ë

„É

„º„»

„¹

ƒ 1ƒy

A is the amount of the return.

P is the principal amount initially deposited.

r is the annual interest rate (expressed as a decimal).

n is the number of compound periods in one year.

t is the number of years.

Carry all calculations to six decimal places on each intermediate step, then round the

final answer to the nearest whole cent.

Suppose you deposit $2,000 for 5 years at a rate of 8%.

a) Calculate the return (A) if the bank compounds annually (n = 1). Round your

answer to the nearest whole cent.

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