Question

If you invest $600 in a six-month CD that pays interest at four percent compounded quarterly, how much interest will you receive when the CD matures in six months?​

Answer 1

Answer:

$12.06

Explanation:

The applicable formula is

A = P( 1 + r) ^ n

where A is the amount after 6 months

P= principal amount: $600

r=4% per year, or 0.04. interest per quarter = 0.04/ 4= 0.01

n = number of periods . 6 months has 2 quarters. n =2

A= $600(1+0.01)^2

A=$600(1.01)^2

A=$600 x 1.0201

A=$612.06

Interest = $612.06- $600

=$12.06