Kareem received a $1900 bonus. He decided to invest in a 3 year certificate of deposit (CD) with an annual interest rate of Answer the questions below. De intermediate computations, and round your final answers to the nearest cent. I list of financial formulas (a) Assuming no withdrawals are made, how much money is in Kareem's account after 3 years? X 5 ? Kareem's investment after 3 years? $0
Kareem received a $1900 bonus. He decided to invest in a 3 year certificate of deposit (CD) with an annual interest rate of Answer the questions below. De intermediate computations, and round your final answers to the nearest cent. I list of financial formulas (a) Assuming no withdrawals are made, how much money is in Kareem's account after 3 years? X 5 ? Kareem's investment after 3 years? $0
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
Related questions
Question
.
1. **(a) Assuming no withdrawals are made, how much money is in Kareem’s account after 3 years?**
*Enter your answer here:* $_________
2. **(b) How much interest is earned on Kareem’s investment after 3 years?**
*Enter your answer here:* $_________
**Explanation for Solving the Problems:**
1. **Formulas Used:**
To find the future value of Kareem's investment, we use the compound interest formula:
\[
A = P \left(1 + \frac{r}{n}\right)^{nt}
\]
Where:
- \(A\) is the amount of money accumulated after n years, including interest.
- \(P\) is the principal amount ($1900).
- \(r\) is the annual interest rate (decimal) (1.31% or 0.0131).
- \(n\) is the number of times interest is compounded per year (monthly, so 12 times).
- \(t\) is the time the money is invested for in years (3 years).
2. **Calculating Final Amount:**
Let's plug in the values:
\[
A = 1900 \left(1 + \frac{0.0131}{12}\right)^{12 \times 3}
\]
3. **Calculating Interest Earned:**
The interest earned \(I\) is the final amount \(A\) minus the principal \(P\):
\[
I = A - P
\]
Please use the provided formula to calculate the values and fill in the blanks for the answers.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd2329ae5-bd80-4bde-acb1-3d6784c24ee9%2Fd1ea28fe-12fc-4a77-b7d3-af077c791a3a%2Frnzorr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Investment Calculation Exercise**
Kareem received a $1900 bonus. He decided to invest it in a 3-year certificate of deposit (CD) with an annual interest rate of 1.31% compounded monthly.
Answer the questions below. Do not round any intermediate computations, and round your final answers to the nearest cent. If necessary, refer to the [list of financial formulas](#).
1. **(a) Assuming no withdrawals are made, how much money is in Kareem’s account after 3 years?**
*Enter your answer here:* $_________
2. **(b) How much interest is earned on Kareem’s investment after 3 years?**
*Enter your answer here:* $_________
**Explanation for Solving the Problems:**
1. **Formulas Used:**
To find the future value of Kareem's investment, we use the compound interest formula:
\[
A = P \left(1 + \frac{r}{n}\right)^{nt}
\]
Where:
- \(A\) is the amount of money accumulated after n years, including interest.
- \(P\) is the principal amount ($1900).
- \(r\) is the annual interest rate (decimal) (1.31% or 0.0131).
- \(n\) is the number of times interest is compounded per year (monthly, so 12 times).
- \(t\) is the time the money is invested for in years (3 years).
2. **Calculating Final Amount:**
Let's plug in the values:
\[
A = 1900 \left(1 + \frac{0.0131}{12}\right)^{12 \times 3}
\]
3. **Calculating Interest Earned:**
The interest earned \(I\) is the final amount \(A\) minus the principal \(P\):
\[
I = A - P
\]
Please use the provided formula to calculate the values and fill in the blanks for the answers.
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