Homework Help: bussiness fianace.

Posted by Anonymous on Tuesday, August 21, 2012 at 12:05pm.

• You deposit $5,000 into a 3-year certificate of deposit account that pays an annual compound interest of 3.0%. When the CD period is up, you roll the entire balance over into another 3-year CD paying 3.5%. How much will you have at the end of 6 years?

bussiness fianace. - Henry, Thursday, August 23, 2012 at 7:23pm
P = Po(1+r)^n.
r = 3% / 100% = 0.03 = Annual % rate expressed as a deciml.
n = 1Comp/yr * 3yrs = 3 Compounding periods.
P = 5000(1.03)^3 = $5463.64 in 3 yrs.

P = Po(1+r)^n.
Po = 5463.64.
r = 0.035.
n = 3.
Plug the given values into the given Eq.
Answer: P = $6057.64 In 6 yrs.

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