A bank promises an annual return of 7.75 percent on a 180 day,$250,000 CD.What will be the total amount due the customer at the end of the six-month period?

Question

Quizplus · Accepted Answer

The interest rate is annual, so we need to divide it by 2 to get the rate for a 6-month period:

7.75% / 2 = 3.875%

Next, we need to calculate the interest earned on the CD:

Interest = Principal x Rate x Time
Interest = $250,000 x 3.875% x 180/365
Interest = $2,812.50

Finally, we add the interest to the principal to get the total amount due:

Total = Principal + Interest
Total = $250,000 + $2,812.50
Total = $259,687.50

Therefore, the answer is B.

A Bank Promises an Annual Return of 7