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Diana put $8000 in a 10-year CD
paying 5% interest compounded
monthly. After 2 years, she
withdrew all her money, and as an
early withdrawal penalty, she paid
back all the interest she made
during the first year. How much
money was Diana left with?

Sagot :

Th amount of money that Diana is left with is $8,430.23.

How much is Diana left with?

The first step is to determine the interest earned in the first year and the total amount that was made in the 2 years.

The formula used to determine the future value with monthly compounding is:

P(1 + r)^( n x m)

Where:

  • P = present value
  • r = periodic interest rate
  • n = number of years
  • m = frequency of compounding

Total amount made in 2 years = $8000 x ( 1 + 5% / 12)^(12 x 2) = 8839.53

Interest earned in the first year = [ $8000 x ( 1 + 5% / 12)^(12) ] - 8000 = $409.29

Amount she is left with =  8839.53 - $409.29 = $8430.23

To learn more about compounding, please check: https://brainly.com/question/18760477

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