Question

Archibald wants to have $22,000 in 13 months. About how much should he put into a 13-month CD that earns simple interest of 7.2% a year calculated monthly in order to reach his goal? A. $12,359.55 B. $20,408.16 C. $20,522.39 D. $12,790.70

Answer 1

The correct answer for this question would be option B. $20,408.16. So how sure are we that this is the answer. Given that Archibald wants to have $22,000 in 13 months and this has a simple interest of 7.2% a year. So we get 7.2% of 22,000 and that would be $1584 in a year for 12 months. 7.2% divided by 12 and that would be 0.6% monthly. 0.6% of 22,000 is 132. Add 1584 and 132, the result is 1, 716. Deduct 1,716 from 22,000 and the result is 20,284. The nearest answer for this would be option B. Hope this answer helps.