Question

If Amy takes this year's savings of 1,200.00 and deposits it into an 18-month Certificate of Deposit account earning 1.25% APY with monthly-paid interest, how much interest will she earn?

Answer 1

Using compound interest, it is found that she will earn $23 in interest during the 18-month period.

What is compound interest?

The amount of money earned, in compound interest, after t years, is given by:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

In which:

• A(t) is the amount of money after t years.

• P is the principal(the initial sum of money).

• r is the interest rate(as a decimal value).

• n is the number of times that interest is compounded per year.

The parameters in this problem are given as follows:

$P = 1200, r = 0.0125, n = 12, t = 1.5$.

The amount of money at the end of the 18 months will be of:

$A(t) = P\left(1 + \frac{r}{n}\right)^{nt}$

$A(t) = 1200\left(1 + \frac{0.0125}{12}\right)^{12(1.5)}$

A(t) = $1,223.

The amount of interest earned is:

I = $1,223 - $1,200 = $23.

More can be learned about compound interest at brainly.com/question/25781328

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