SOLUTION: Using daily compounding, calculate the compound amount (in $) of a $7,000 investment for each of the three CDs. The First National Bank is offering a 5 year CD at 3% interest.

Algebra ->  Finance -> SOLUTION: Using daily compounding, calculate the compound amount (in $) of a $7,000 investment for each of the three CDs. The First National Bank is offering a 5 year CD at 3% interest.       Log On


   

Question 1172736: Using daily compounding, calculate the compound amount (in $) of a $7,000 investment for each of the three CDs.
The First National Bank is offering a 5 year CD at 3% interest.
The Second National Bank is offering a 5 year CD at 4% interest.
The Third National Bank has a 5 year CD at 4.5% interest.
I used the formula A=P (1 + i/365)^n
I got 7065.31 and 7002.88 for the first national bank but they were marked wrong. Is there another formula I should follow?

Answer by ikleyn(52781) About Me  (Show Source):
You can put this solution on YOUR website!
.

For daily compounding,  the  CORRECT  formula is

            A = P%2A%281+%2B+i%2F365%29%5E%28365%2An%29,

where  n  is the number of years.

You used  INCORRECT  formula ---- THEREFORE,  you need  RE-CALCULATE  everything,  using the correct formula.

------------

See the lessons
    - Compound interest percentage problems
    - Problems on discretely compound accounts
in this site,  and learn the subject from there.


After reading this lesson, you will tackle such problems on your own without asking for help from outside.

Also,  you have this free of charge online textbook in ALGEBRA-I in this site
    - ALGEBRA-I - YOUR ONLINE TEXTBOOK.

The referred lesson is the part of this online textbook under the topic "Logarithms".


Save the link to this online textbook together with its description

Free of charge online textbook in ALGEBRA-I
https://www.algebra.com/algebra/homework/quadratic/lessons/ALGEBRA-I-YOUR-ONLINE-TEXTBOOK.lesson

to your archive and use it when it is needed.


Happy learning (!)