Question

Anthony wants to buy CD for $400 that earns 2.5% APR and is compound quarterly. The CD matures in 3 years. Hi interest earned will not be reinvested in the cd. what will Anthony total interest earned be at the date of maturation? APEX
A. $60.00
B. $30.00
C. $15.00
D. $7.50

Answer 1

Answer:

The correct option is:   B.  $30.00

Step-by-step explanation:

The formula for compound interest is.......

$A=P(1+\frac{r}{n})^n^t$ , where A= Final amount, P= Initial amount, r= rate of interest in decimal form, n= number of compounding in a year and t= time duration in years.

Anthony wants to buy CD for $400 that earns 2.5% APR and is compound quarterly and the CD matures in 3 years.

So here,  $P= 400, r=2.5\%=0.025, t= 3$

As the CD is compounded quarterly, so here  $n= 4$

Plugging these values into the above formula......

$A= 400(1+\frac{0.025}{4})^(^4^*^3^)\\ \\ A= 400(1+0.00625)^1^2\\ \\ A=400(1.00625)^1^2\\ \\ A= 431.053...$

So, the amount of total interest earned $= (\ 431.053...-\ 400)=\ 31.053... \approx \ 30.00(Approximately)$