Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
- A $8,000 CD is purchased through a local bank that pays 3.50% interest compounded quarterly for three (3) years. Calculate the maturity value.
Expert Solution
Step 1
A CD (Certificate of Deposit) is a type of financial product offered by banks and credit unions, where the customer deposits a sum of money for a fixed period of time. In return, the bank pays a fixed interest rate, which is typically higher than what is offered for savings accounts. The interest rate on a CD is determined by the bank and is usually based on the length of the CD term and the amount of the deposit. CD interest rates can be fixed or variable, and the interest earned can be paid out at regular intervals or at the end of the term.
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