Question

Sarah is investing $10,000 in a CD at a bank. If the bank uses simple interest, and the bank pays 2.75% in interest annually, how much will the CD be worth in total at the end of 7 years when the CD matures? *

Answer 1

Answer: it would be worth $11925 when it matures after 7 years.

Explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the loan.

P represents the principal or amount invested in the CD.

R represents interest rate on the amount invested in the CD.

T represents the duration of the investment in years.

From the information given,

P = $10,000

R = 2.75%

T = 7 years

I = (10000 × 2.75 × 7)/100

I = $1925

Therefore, the worth of the CD in total at the end of 7 years when the CD matures is

10000 + 1925 = $11925