Question

Consider a CD paying a 1.1% APR compounded daily.
(a) Find the periodic interest rate.
(b) Find the future value of the CD if you invest $3000 for a term of 5 years.

Answer 1

\(1.011^{1/365} = \)??

Answer 2

uhhhm

Answer 3

It takes a calculator! Do you have one?

Answer 4

Yes. Is that 1.011 times one divided by 365?

Answer 5

Is that 1.11% rate correct? (It seems pretty low).

Answer 6

Yeah, that's what the question on my homework asks.

Answer 7

Is anyone able to help me

Answer 8

I can help

Answer 9

Im really having trouble figuring this out

Answer 10

When using an interest rate in a formula it has to be converted from a percentage so you must divide it by 100.
1.11% = .0111
annual rate = [(1+r/365)^365]-1
annual rate = [(1 +.0111/365)^365]-1
annual rate = 1.01116166291122 -1
annual rate = .01116166291122 changing it to a percentage =
1.116166291122 %

Answer 11

So to find the future value I plug in numbers

Answer 12

No that's just to find the interest rate converted to annual.
For calculating the total amount, you need the annuity formula. (see attached)

Answer 13

So total for 3,000 after 5 years at .01116166291122 interest

Total = (3,000 * ([(1+.01116166291122)^6])/.01116166291122) - amount
Total = (3000 * [(1.01116166291122)^6] / .01116166291122) - 3,000
Total = (3000 * 1.06886676311194 / .01116166291122) - 3,000
Total = (3000 *

Geez it looks as if I messed up somewhere in there.
Here's a page with the formulas and how to calculate and here's a page http://1728.org/annuity.htm that does all the calculation automatically.
Yes, it is my site.
:-)

Answer 14

Hmm I forgot the other link - here it is
http://1728.org/annuity2.htm

Answer 15

Oh and the answer to that problem is 15.509.81