Your brother has asked you to help him with choosing an investment. He has $7,900 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 0.0500 annually with the interest being paid quarterly. What will be the value of the investment in two years? Round to two decimal places.

The value of this investment in two years' time is $8,725.44

Explanation:

The problem we are faced with is in deciding the worth of such investment in two years' time, that is future value of the investment,hence the future value formula below comes handy:

FV=PV*(1+r/t)^N*t

PV is the present of the investment today at $7,900

r is the rate of return of 0.0500 annually, but 0.0125  (0.0500/4) quarterly.

t is the number of times interest is paid yearly, 4 times in this instance.

N is the number of years the investment lasts, which is years.

FV=$7,900*(1+0.0125)^2*4

FV=$7,900*(1.0125)^8

FV=$8725.440

The investment's worth in two years is $8725.44