Final answer:
The formula for calculating interest on a CD is Interest = Principal Amount × Interest Rate × Time.
Step-by-step explanation:
The formula for calculating interest on a CD is:
Interest = Principal Amount × Interest Rate × Time
Where:
- Principal Amount is the amount of money deposited in the CD
- Interest Rate is the annual interest rate
- Time is the number of years the CD is held
For example, if you deposit $100 in a CD with a 5% interest rate for 1 year, the interest calculation would be:
Interest = $100 × 0.05 × 1 = $5
So, the interest earned on the CD would be $5.