Question

Herman put some money in a 1-year CD that compounds interest monthly, and he made $28.12 in interest the first month. If the interest rate of the CD stays the same, how much will he make in interest the second month?

Answer 1

I’m sure the answer is More than $28.12, since it compounds monthly.

Answer 2

If the interest rate of the CD stays the same, the interest in the second month will be more than $28.12.

Explanation:

Herman put some money in a 1-year CD that compounds interest monthly, and he made $28.12 in interest the first month.

If the interest rate of the CD stays the same, the interest in the second month will be more than $28.12.

This is because, the interest is compounded monthly and interest on interest earns more.

Every month thereafter will be a little more than the one before it.