Assume that a 30-month cd purchased for $ 1000 pays simple interest at an annual rate of 5.5%. how much total interest does it earn? what is the balan

Question

Cheyenne Grant

Business

14 January, 06:03

Assume that a 30-month cd purchased for $ 1000 pays simple interest at an annual rate of 5.5%. how much total interest does it earn? what is the balan

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Osvaldo Graves · Answer 1

Using the formula to calculate simple interest.

I=P*r*n where I=interest, P=Principle, r=rate and n=number of periods.

To incorporate the number of periods in months, divide the specified annual rate by the number of months in a year (12). Therefore the calculation will be

i = ($1000*5.5% * (30/12)) = $137.5.

The total interest earned is $137.5

And so the cd balance in the bank is calculated as principle+interest. $1000+$137.5=$1,137.5