Suppose you buy a two-year $7500 CD at an APR of 6.75% compounded monthly. How much interest will you be paid by the end of the period?

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we have:

A = P(1 + r/n)^(nt)
where A is the final amount, P is the principal, r is the annual interest rate expressed as a decimal, n is the number of times the interest is compounded per year, and t is the time period in years.

In this case, P = $7500, r = 0.0675, n = 12 (since the interest is compounded monthly), and t = 2. Plugging in these values, we get:

A = $7500(1 + 0.0675/12)^(12*2)
A = $8580.78

Therefore, the interest earned is $8580.78 - $7500 = $1080.78. The answer is C.

Suppose You Buy a Two-Year $7500 CD at an APR