Question

assume that a 3 month CD purchased for $2000 pay a simple interest at an annual rate of 10%. How much total interest does it earn ? What is the balance at maturity?

Answer 1

CD = certificate of deposit (an investment)
Interest rate, i = 10% per annum (simple interest)
Principal, P = $2000 (present value)
Period, T = 3 months = 0.25 year

Simple interest formula
Interest earned = Pit
=2000*0.10*0.25
=$50

Balance at maturity (amount that investor gets after three months)
=$2000+$50
=$2050