Question

Philomena put some money in a 1-year CD that compounds interest monthly, and she made $14.06 in interest the first month. If the interest rate of the CD stays the same, how much will she make in interest the second month? A. More than $14.06 B. More than $7.03 but less than $14.06 C. $14.06 D. $7.03

Answer 1

Philomena will make more than $14.06 in interest the second month.

Step-by-step explanation:

The amount of interest Philomena makes in the second month will be more than $14.06.

To understand why, we need to consider how compound interest works.

1. 
   
3. Compound interest is calculated based on the principal amount (the initial amount of money) and the interest rate.
4. 
   
6. When interest is compounded monthly, the interest rate is divided by 12 and applied each month.
7. 
   
9. Since Philomena made $14.06 in interest the first month, we know that the interest rate for the CD is more than $14.06 divided by the principal amount of money she invested.
10. 
    
12. Therefore, in the second month, Philomena will earn more interest because the interest will be applied to the increased principal amount (the original amount plus the first month's interest).