Freddy purchased a certificate of deposit for $20,000 on July 1,2014.The certificate's maturity value in two years (June 30,2016)is $21,218,yielding 3% before-tax interest.

Question

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The 3% interest rate is applied to the $20,000 original investment in the first year $600 ($20,000 × 3%).The certificate was held for only 6 months in 2014;therefore,the interest income for 2014 is $300 ($600 × 6/12).Answers a. ,b. ,and c.are incorrect because these answers assume a method of allocating the income that differs from the effective interest method.

Freddy Purchased a Certificate of Deposit for $20,000 on July