1. If you invest $5000 in a CD earning 5.6% annual interest compounded quarterly, how much is your investment worth at the end of one year?
| When | How much earning interest | interest earned | $ interest earned | Value of investment (end of quarter) |
| 1st quarter | 5000 | .056/4=.014 | .014*5000=70 | 5070 |
| 2nd Q | 5070 | .014 | 70.98 | 5140.98 |
| 3rd Q | 5140.98 | .014 | 71.97 | 5212.95 |
| 4th Q | 5212.95 | .014 | 72.98 | 5285.93 |
Investment value at the end of 1 year is $5285.93
2. If you invest $3000 in a CD earning 4.8% annual interest compounded quarterly, how much is your investment worth at the end of one year
| When | How much earning interest | interest earned | $ interest earned | Value of investment (end of quarter) |
| 1st quarter | 3000 | .048/4=.012 | .012*3000=36 | 3036 |
| 2nd quarter | 3036 | .012 | 36.43 | 3072.43 |
| 3rd Q | 3072.43 | .012 | 36.87 | 3109.30 |
| 4th Q | 3109.30 | .012 | 37.31 | 3146.61 |
Investment value at the end of 1 year is $3146.61
3. If you invest some money in a a CD that compounds interest more than annually, what will be true about your annual interest rate compared to your APY (Annual percentage yield)?
Your interest rate will be slightly lover than your APY. You could also say (it would mean the same thing) that your APY was slightly higher than your interest rate.
4. If you invest $8000 in an account that is compounded more than annually, and at the end of the year your investment is worth $8378, what is the corresponding APY?
8378-8000=378 is the amount of interest earned, which gives an APY of
378/8000=.04725, which you would be reported as either 4.7% or 4.73% (different sources will make different choices about how many decimal places to publish)
5. If you invest $6000 in an account that is compounded more than annually, and at the end of the year your investment is worth $6321, what is the corresponding APY?
6321-6000=321 is the amount of interest earned, which gives an APY of
321/6000=.0535, so the answers 5.4% and 5.35% would be considered correct.
6. If you invest $1000 in a CD at 4% annual interest, compounded quarterly, what is the corresponding APY?
In 1 year you will earn interest 4 times, earning 4/4=1% each time:
| When | How much earning interest | quarterly interest rate | $ interest earned | Value of investment (end of quarter) |
| 1st quarter | 1000 | .01 | .01*1000=$10 | 1010 |
| 2nd quarter | 1010 | .01 | $10.10 | 1020.10 |
| 3rd Q | 1020.10 | .01 | $10.20 | 1030.30 |
| 4th Q | 1030.30 | .01 | $10.30 | 1040.60 |
total interest earned in 1 year is $40.60 (=1040.60 - 1000)
As an anual interest rate that would be 40.60/1000=.0406 or 4.06%
APY is 4.06%
(The rounded answer 4.1% would be acceptable)
7. If you invest $2000 in a CD at 5% annual interest, compounded quarterly, what is the corresponding APY?
In 1 year you will earn interest 4 times, earning 5/4=1.25% each time:
| When | How much earning interest | quarterly interest rate | $ interest earned | Value of investment (end of quarter) |
| 1st quarter | 2000 | .0125 | .0125*2000=$25 | 2025 |
| 2nd quarter | 2025 | .0125 | 25.31 | 2050.31 |
| 3rd Q | 2050.31 | .0125 | 25.63 | 2075.94 |
| 4th Q | 2075.94 | .0125 | 25.95 | 2101.89 |
total interest earned in 1 year is $101.89 (= 2101.89 - 2000)
As an anual interest rate that would be 101.89/2000=.50945 or 5.09%
APY is 5.09%
(the rounded answer 5.1% would also be acceptable)