Solve using 987 You are given $15,000 to put into a CD. A Certification of Depos
ID: 3115951 • Letter: S
Question
Solve using 987
You are given $15,000 to put into a CD. A Certification of Deposit (CD) is a low risk form of saving money for a certain period of time. Use your the first 3 digits of your phone number as the rate (the numbers after the area code 987). Calculate how much money you will have in the amount of years equivalent to twice your age if the money is compounded continuously. Please show all calculations. Note: If the digits for your phone number are 123, then the rate you use is 1.23%. The decimal form will be .0123 in your calculations.
Explanation / Answer
Let us assume that the cellphone number is +19875502671 and that my age is 20 years. Then the rate of interest is 5.50 %. The formula for continuous compounding is A = Pert, where P is the principal/initial amount, r is the rate of interest, t is the number of years and A is the final amount.
Here, P = $ 15000, r = 5.5/100 = 0.055. However, it is not clear whether t is meant to be 20 years or 40 years, so we will compute both.
Case 1: A = 15000*e0.055*20 = 15000*e1.10 = 15000*3.00416602 = $ 45062.49( on rounding off to the nearest cent).
Case 2: A = 15000*e0.055*40 = 15000*e2.20 = 15000* 9.0250135 = $ 135375.20( on rounding off to the nearest cent).