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Dynoxo Textiles has a cash inflow of $1 million, which it needs for a long-term investment, at the end of one year. It plans to deposit the money in a bank CD that pays daily interest at 4.50 percent. What will be the value of the investment at the end of the year? (Round to the nearest dollar.)

Answer :

jepessoa

Answer:

$1,046,025

Explanation:

since the CD pays compound daily interest, we can calculate the future value of the CD using the following formula:

Future value = present value ( 1 + rate)ⁿ

  • PV = $1,000,000
  • rate = 4.5% / 365 = 0.012328767%
  • n = 365

FV = $1,000,000 (1.00012328767)³⁶⁵ = $1,046,024.96 ≈ $1,046,025

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