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Question 1098354: Haley invested $2,000.00 in a 36-month certificate of deposit (CD) that earned 7% annual simple interest. When the CD matured she rolled the entire amount into a mutual fund that had growth equivalent to 14% compounded annual. How much was the mutual fund worth after 9 years? Round your answer to 2 decimal places and separate the thousands by a comma.
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! she put 2000 into a cd that earned 7% annual interest simple for 36 months.
formula for future value of an investment at simple interest is:
f = p * (1 + r*n)
f is the future value
p is the present value
r is the interest rate per time period
n is the number of time periods.
formula becomes:
f = 2000 * (1 + .07*3)
that's if the time periods are expressed in years.
if the time periods are expressed in months, then the interest rate is per month and the number of time periods is in months.
formula would then becomes f = 2000 * (1 + .07/12 * 36)
the answer will be the same.
to confirm, use the two formulas to get:
f = 2000 * (1 + .07 * 3) = 2420.
f = 2000 * (1 + .07/12 * 36) = 2420.
at the end of the 3 year period, the balance is invested at 14% interest per year compounded annually for 9 years.
the formula there is f = p * (1+r)^n
f is the future value
p is the present value
r is the interest rate per time period.
n is the number of time period.
formula becomes f = 2420 * (1.14)^9
solve for f to get f = 7869.715421
round to 2 decimal and include commas and the answer becomes 7,869.72
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