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Dr. Zaius invests $10,000 in a CD with an annual interest rate of 4% that compounds semi-annually (twice a year). After six months, he rolls over the CD into another CD with an annual interest rate of 5% that also compounds semi-annually. After six months in the second CD, how much does Dr. Zaius have, in dollars?

 
Guest Aug 12, 2017
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 #1
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The first CD compounds at a rate of  percent for the first six months, so Dr. Zaius has  dollars. The second CD compounds at a rate of  percent for the next six months, so Dr. Zaius then has  dollars.

 
Guest Aug 12, 2017
 #2
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FV = PV[1 + R]^N

FV =10,000 x [1 + 0.04/2]^1

FV =10,000 x 1.02

FV =$10,200 - Principal + interest for the first 6 months.

 

FV =$10,200[1 + 0.05/2]^1

FV =$10,200 x 1.025

FV =$10,455.00 - The amount Dr. Zaius would have after 1 year.

 
Guest Aug 12, 2017

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