Vanessa wants to buy a CD for $500 that earns 3% APR and is compounded quarterly. The CD matures in 2 years. Her interest earned
will not be reinvested in the CD. What will Vanessa's total interest earned be at the date of maturation?
A. $30.00
B. $15.00
C. $60.00
D. $120.00
1 answer:
The correct answer is Choice A: 30.
To find the amount of interest, we have to use the formula for compounded interest.
It would be: y = 500(1 + 0.03/4)^(8)
We divided the 3% by 4 because it is quarterly. We raised it to the 8th power, because it will be compounded 8 times (4 x 2).
The interest comes out to $30.80.
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I believe what you are looking for is... 9.5/.2= 47.5
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