Question

Harvey Alson invested $7,500 in a 2-year CD that pays 6% interest compounded quarterly. What is the amount of interest that Harvey will earn when the CD matures?

Answer 1

A=7,500×(1+0.06÷4)^(4×2)
A=8,448.69

Interest earned=8,448.69−7,500
Interest earned=948.69

Answer 2

The answer is $948.75.

Explanation:

P = 7500

t = 2

r = 6% or 0.06

n = 4 (quarterly means 4 times in a year)

Now, compound interest formula is given as :

`A=P(1+(r)/(n))^(nt)`

Now putting these values in the formula, we get

`A=7500(1+(0.06)/(4))^(4*2)`

=>
`A=7500(1.015)^(8)`

A = $8448.75

So, interest earned will be =
`8448.75-7500=948.75` dollars

The answer is $948.75.