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Malichai invests $500 in a Certificate of Deposit (CD) with a fixed interest rate of 3% per annum. How much interest will Mark earn after two years?

$30

$15

$6

1 answer

To calculate the interest that Malichai will earn from his Certificate of Deposit (CD), we can use the formula for simple interest:

\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \]

Where:

  • Principal = $500
  • Rate = 3% per annum = 0.03 (as a decimal)
  • Time = 2 years

Now, substituting these values into the formula:

\[ \text{Interest} = 500 \times 0.03 \times 2 \]

\[ \text{Interest} = 500 \times 0.03 = 15 \quad \text{(for one year)} \]

\[ \text{Interest} = 15 \times 2 = 30 \quad \text{(for two years)} \]

So, the interest earned after two years is $30.