Final answer:
The interest for a three-year CD for $5,000 at an interest rate of 2.5%, compounded annually, is $345.31.
Step-by-step explanation:
To find the interest for a three-year CD of $5,000 at an interest rate of 2.5%, compounded annually, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
where:
- A = the future amount
- P = the principal amount (initial investment)
- r = the annual interest rate (as a decimal)
- n = the number of times that interest is compounded per year
- t = the number of years
Plugging in the values from the question, we have:
A = 5000(1 + 0.025/1)^(1*3)
Simplifying this equation, we get:
A = 5345.31
So, the interest for a three-year CD for $5,000 at an interest rate of 2.5%, compounded annually, is $5345.31 - $5000 = $345.31.