SOLUTION: If I put a 1000 dollars in a 5 yr cd account with the interest rate of 0.82% how much money will I make in 5 yrs

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Question 1103394: If I put a 1000 dollars in a 5 yr cd account with the interest rate of 0.82% how much money will I make in 5 yrs
Answer by math_helper(2461) About Me  (Show Source):
You can put this solution on YOUR website!
Assuming compounded interest (i.e. interest is paid on previously-earned interest):
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+F+=+P%281%2Br%2Fn%29%5E%28nt%29+
Where:
F = future value
P = present value
r = annual interest rate, expressed as a decimal
n = compounding periods per year
t = number of years
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+F+=+1000%281+%2B+0.0082%2F1%29%5E%281%2A5%29+=+1000%281.041678%29+=+1041.68+
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$1041.68 is how much the $1000 will have grown to after 5 years so you WILL HAVE MADE $41.68 in interest.
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For the simple interest case (i.e. interest is not paid on previously paid interest):
+cross%28+F+=+P%281%2Br%2An%29%29+
EDIT 12/5/17: The line above should have read +F+=+P%281%2Br%2At%29+
+F+=+1000%281+%2B+%28.0082%2A5%29%29+=+1000%281.041%29+=+1041.00+
Here simple interest earns you $41.00 over the 5 years.
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Not a huge difference here between compounded interest and simple interest. This is because the interest rate is very low and the time invested is not long enough for compounding to make much of a difference. If the interest rate were higher (say 8%) and the time period longer (say 20 years) you'd see a much bigger difference in the two results.
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