Question

Aiden is trying to save money and has $1800 to set aside in some type of savings account. He checked his bank one day, and found that the rate for a 12-month CD had an annual percentage yield of 4.25%. The interest rate on his savings account was 2.75% annual percentage yield. How much more simple interest wpuld Aiden earn if he invested in a CD for 12 months rather than leaving the $1800 in a regular savings account?

Answer 1

I = Prt

Interest on CD = 0.0425 x $1,800 = $76.5
Interest on savings = 0.0275 x $1,800 = $49.5

Difference of interest on CD and Interest on savings = $76.5 - $49.5 = $27

Therefre, he will earn $27 more if he invest in a CD rather than in a savings.