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.AcertificateofdepositispurchasedforGHS6000andisheldforsevenyears.Ifthe certificateearnsaninterestof8%,whatisitworthattheendoftheperiod?

Question

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Solution

To find out the worth of the certificate of deposit at the end of the period, we need to calculate the compound interest.

Here's the step-by-step calculation:

  1. Identify the principal amount, the rate of interest, and the time period. In this case, the principal (P) is GHS 6000, the rate of interest (r) is 8% or 0.08 (in decimal form), and the time (t) is 7 years.

  2. Use the formula for compound interest, which is A = P(1 + r/n)^(nt). In this case, since the interest is likely compounded annually, n would be 1.

  3. Substitute the values into the formula: A = 6000(1 + 0.08/1)^(1*7).

  4. Simplify the equation: A = 6000(1 + 0.08)^7.

  5. Calculate the value: A = 6000(1.08)^7.

  6. The final value, A, is approximately GHS 9,753.87.

So, the certificate of deposit is worth approximately GHS 9,753.87 at the end of the seven-year period.

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