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If you buy a 10 year, 2% CD for $12,000. How much is it worth at...

If you buy a 10 year, 2% CD for $12,000. How much is it worth at maturity?

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Answer #1

Certificate of deposit is the special account which locks the fund for a specific period and gives interest on it over the period of deposit.

Here to calculate the maturity value the principal amount , time and rate is required.

Based on it the formula for the maturity value = Principal *( 1 + Rate/100)N

Maturity Value = 12000 (1 +2/100) 10

Maturity value = 12000 (1+0.2)10 = 12000 * 1.218994 = 14627.928

Hence the CD will be worth $ 14627.928 at maturity.

Please note : It is assumed that interest is compounded annually and no adjustment is made for inflation effect.

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