Iris invested $8,000 in a 9-month term CD which offers an annual compound interest rate of 8% compounded monthly. What is the value of her investment at the maturity of the CD?
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The future value (FV) of an investment (P) at an annual compound interest rate of (r) compounded times a year for years is given by
Since the CD is compounded monthly, that means that in a year it will be compounded 12 times, so .
Substituting all values into the formula, we have:
Therefore, the value of her investment at the maturity of the CD is $8,493.00.