What is the future value and compound interest of $5000 in a 2 year CD at 12%, compounded monthly?

Answer 1

== $6,348.67

PS - I would guess the IFA has deducted his fees before paying you the interest :-)


I created a spreadsheet (in MS Excel) with 2 columns.

Col A title = 'month', 25 rows, numbers, 0 to 24 (2 years)
B .. first row (month 'zero') is your starting capital, in this case $5000

So, how much will it have grown after the first month ?

Answer 1/12ths of a years interest... so if the annual Interest rate is 12%, then monthly rate is 1%

Since 1% of $5000 is $50, at the end of month 1 you should have $5050.

In general, for each month, your money increases from the previous total to a new total = previous PLUS 1% of previous.

In other words 1.01 times the (previous)

SO .. in column B, second row enter the equation

=1.01*(colB first row)

Copy & paste the equation into the 23 remaining rows

The last figure, in row Month=24 will be result AFTER 24 months (i.e. after 2 years)

Answer 2

6,272

I have a program that works it out.