Problema person places 5000 in a certificate of deposit, Ask an Expert

Finance

Problem:

A person places $5,000 in a certificate of deposit that matures in 20 years and pays annual interest rate of 3%. What will be the value at maturity if the interest is reinvested in the deposit?

Required:

Question 1: How much interest will accumulate after 20 years?

Question 2: How much would they receive annually if they chose not to reinvest the interest and what would be the total interest paid out over 20 years?

Question 3: Why are answers a and b different?

Please provide step by step solution and also show all work.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147311

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