Question

anthony wants to buy a CD for $400 tht earns 2.5% APR and is compounded quarterly. the CD matures in 3 years. his interest earned will not be reinvested in the CD. what will anthony's total interest earned be at the date of maturation?

A. $15.00
B. $60.00
C. $7.50
D. $30.00

Answer 1

To calculate the total interest earned on a CD (certificate of deposit) with the given parameters, we can follow the formula for simple interest since the interest is not reinvested.

1. **Determine the annual interest rate:**
The annual interest rate (APR) is 2.5%, which can be expressed as a decimal:
\( r = 0.025 \)

2. **Identify the principal amount:**
The principal (initial deposit) is:
\( P = 400 \) dollars

3. **Identify the time period in years:**
The time period for the investment is:
\( t = 3 \) years

Now we will calculate the total interest earned using the simple interest formula:
\[
\text{Interest} = P \times r \times t
\]

4. **Plug the values into the formula:**
\[
\text{Interest} = 400 \times 0.025 \times 3
\]

Calculating the interest:
\[
\text{Interest} = 400 \times 0.025 = 10
\]
\[
\text{Interest} = 10 \times 3 = 30
\]

So, the total interest earned at the date of maturation will be \$30.00.

The correct answer is:
**D. $30.00**