A saver places - b) How much interest will the saver earn...

Download Document
Showing pages : 1 of 1
This preview has blurred sections. Sign up to view the full version! View Full Document
A saver places $1,000 in a certificate of deposit that matures after 20 years and that each year pays 4% interest, which is compounded annually until the certificate matures. a) How much interest will the saver earn if the interest is left to accumulate? $1,000 x 2.191 = $2,191; $1,000 principal + $1,191 in interest They will accumulate $1,191 in interest
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: b) How much interest will the saver earn if the interest is withdrawn each year? They would earn $40; $1,000 x 1.04 per year 20 years x $40 = $800 c) Why are the answers to a and b different? because in part a the interest principal amount increases yearly , it is like interest deposit. In part b interest principal is always 1000....
View Full Document

Create a FREE account now to get started. Log In

The email address you entered is not valid. The email address you provided is already in use.
Your username must be at least 5 characters. Your username must consist of only alphanumeric characters. Your username must contain at least one letter. Your username contains inappropriate language. Another user has already claimed this username.
Your password must be at least 6 characters in length.
{[ $select.selected.label ]} Please select a valid school.
By creating an account you agree to our Privacy Policy, Terms of Use, and Honor Code.
Create my FREE account Processing...
Sign Up with Facebook

We will never post anything without your permission.

Already on Course Hero? Log In