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Chapter 6

Test Yourself

Chapter

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Present Value of a $\mathr…

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A bank offers a customer a…

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Jerome deposits $\$ 3,700$…

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Hey, this one says on January first two thousand, the value of a certificate of deposit, which is a CD with seven hundred and sixty five dollars. If the value of the CD increased by six percent each year, what was its value in dollars on January first, two thousand twelve? So if we're going from two thousand of January first of two thousand junior first of two thousand twelve were that twelve years is passing twelve years just okay, so then we can look at the initial amount. And we always know that the equation is going to be X where access the final amount that I were eyes initial moment, sometimes one plus the rate raise. The T power is our standard baseline equation, so that's going to plug in what we know. We know that seven sixty five initial amount so we could say seven sixty five and then one plus the rates and the rate is six percent, which can be expressed zero point zero six and decimals. And then again we said that twelve years had passed. We can raise that the twelfth power, Then if we plug in seven sixty five times one plus point zero six raised in twelfth power, we would get one five three nine. So we know that after twelve years, at six percent interest, the value increased from seven hundred and sixty five dollars to the one thousand and five hundred thirty nine dollars D is our answer.

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