Andre De Quadros bought a $3,500, 9-month certificate of deposit (CD) that would earn 9.0% annual simple interest. What is the value of the CD when it matures? Round your answer to to the nearest cent.
A)$3,578.75
B)$3,657.50
C)$3,815.00
D)$3,710.00
E)$3,736.25

Question

Quizplus · Accepted Answer

To calculate the value of the CD at maturity, we need to use the simple interest formula:

I = Prt

Where I is the interest earned, P is the principal (initial amount invested), r is the annual interest rate, and t is the time in years. Since the CD has a 9-month term, we need to express the time in years as a fraction of a year:

t = 9/12 = 0.75 years

Substituting the given values, we get:

I = 3500 * 0.09 * 0.75 = $236.25

Therefore, the value of the CD at maturity is:

Value = Principal + Interest = $3500 + $236.25 = $3736.25

Rounding to the nearest cent, we get the final answer of $3,736.25, which is closest to option E.

Andre De Quadros Bought a $3,500, 9-Month Certificate of Deposit