Question

Rachel is investing $14,000 in a CD at a bank. If the bank uses simple interest and the bank pays 2.5% annually, how much will the CD be worth in total at the end of 7 years when the CD matures?

Answer 1

Answer:

Step-by-step explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the amount of money invested.

P represents the principal or amount of money invested.

R represents interest rate on the investment.

T represents the duration of the investment in years.

From the information given,

P = $14000

R = 2.5%

T = 7 years

Therefore,

I = (14000 × 2.5 × 7)/100

I = $2450

The total amount that the CD would be worth after 7 years is

14000 + 2450 = $16450

Answer 2

Answer:

Value of CD in total at the end of 7 years when the CD matures is $16646

Step-by-step explanation:

This is based on the formula A= P(1+r)^ n

where r = annual rate of interest,

           P = Principal amount,

           n = number of years

p = 14000

r = 2.5

n = 7

A = 14000 ( 1+ 0.025) ^ 7

= 14000 ( 1.025)^7

=14000 x 1.189

=16646

A = $16646