RatedrillMonthly compounding
A time value of money problem from Ratedrill. Solve it with one answer box, with fresh numbers on every attempt and the formula, calculator keystrokes and Excel version in the worked answer, and it is checked the moment you submit.
The task
You put $1,000 into a certificate of deposit that pays 2.25% APR, compounded monthly. What is it worth after 20 years?
What this problem teaches
The formula: FV = PV × (1 + APR / 12)^(12 × years). Set P/Y = C/Y = 1, so I/Y is the rate per period. Cash you pay out is negative and cash you receive is positive.
A hint if you get stuck
Monthly compounding: use APR / 12 as the rate per month and 12 × years as the number of months.
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