Question

You open a 5-year CD for $1,000 that pays 2% interest, compounded annually. What is the value of that CD at the end of the five years?

Short answer

$1102.50

Step-by-step solution

Step 1. Definition

The amount is the aggregate of something or the total value.

Step 2. Explanation

The principal amountis$1,000. The rate of interestis 2%per annum and the time is5 years and the interestis compounded annually.

$\$1000{\left(\frac{1+5}{100}\right)}^2=\$1102.50$