Suppose you have $1,500 and plan to purchase a 5-year certificate of deposit (CD) that pays 3.5% interest, compounded annually. How much will you have when the CD matures?

Gb550 financial management quiz | Business & Finance homework help

CDs (Certificates of Deposit) are savings accounts that pay a certain interest rate over a set period. You have $1500, and you plan to buy a CD for 5 years that will pay 3.5% compounded annual interest. The money will earn interest every year, and the principal is added at the end each year.

CAGR can be used to calculate the amount you’ll have at maturity after 5 years. We can use CAGR to calculate how much money would be available if money had been invested in multiple periods of time with different rate returns. The CAGR is used in this example to calculate how much money our investment will grow by after five years, assuming a 3.5% rate of return.

We can use CAGR to plug in the initial investment of $1500, our annual returns (3.5%), and finally, our number of period which is five years.
Return on investment: (1 +.035)5= 1.5987, or 59.87% over a five-year period.

To find out exactly how much money you’ll have when your CD matures after 5 years , multiply $1500 by 1.5987: 1500 x 1.5987 = 2397.05 Therefore, your total balance after 5 years with 3..5% interest compounded annually will be $2,397.05