Question

Anthony wants to buy CD for $400 that earns 2.5% APR and is compound quarterly. The CD matures in 3 years. Hi interest earned will not be reinvested in the cd. what will Anthony total interest earned be at the date of maturation? APEX

A. $60.00
B. $30.00
C. $15.00
D. $7.50

Answer 1

it is $30.00

Explanation:

Answer 2

The correct option is: B. $30.00

Explanation:

The formula for compound interest is.......

`A=P(1+(r)/(n))^n^t` , where A= Final amount, P= Initial amount, r= rate of interest in decimal form, n= number of compounding in a year and t= time duration in years.

Anthony wants to buy CD for $400 that earns 2.5% APR and is compound quarterly and the CD matures in 3 years.

So here,
`P= 400, r=2.5\%=0.025, t= 3`

As the CD is compounded quarterly, so here
`n= 4`

Plugging these values into the above formula......

`A= 400(1+(0.025)/(4))^(^4^*^3^)\\ \\ A= 400(1+0.00625)^1^2\\ \\ A=400(1.00625)^1^2\\ \\ A= 431.053...`

So, the amount of total interest earned
`= (\$431.053...-\$400)=\$31.053... \approx \$30.00(Approximately)`