Question

The table below shows the future value of a certificate of deposit (CD) after x years Eric states the applied interest is simple interest true or false?

Answer 1

Answer:

A. (True)

Step-by-step explanation:

Answer 2

Answer:

Option B.

Step-by-step explanation:

Eric states the applied interest is simple interest. We need to check whether the this statement is true or false.

In simple interest, the amount of deposit increased at a constant rate. It means the difference between future values of any two consecutive years will same.

Difference between future values of first two years.

$d_1=210.13-205.00=5.13$

Difference between future values of 2nd and 3rd year is

$d_2=215.38-210.13=5.25$

Since d₁≠d₂, therefore, the given statement is false.

Thus, the correct option is B.