A $2 million jumbo CD is paying a quoted 3.55 percent interest rate on 180-day maturity CDs. How much money will you have at maturity if you invest in the CD?

Question

Quizplus · Accepted Answer

To calculate the amount of money at maturity, we need to use the simple interest formula:

Interest = Principal x Rate x Time

Here, the principal is $2,000,000, the rate is 3.55% or 0.0355 (in decimal form), and the time is 180 days or 0.5 years (since the rate is quoted on a 180-day basis).

Thus, we have:

Interest = $2,000,000 x 0.0355 x 0.5 = $35,500

The total amount of money at maturity is the sum of the principal and the interest earned, which is:

$2,000,000 + $35,500 = $2,035,500

Therefore, the best choice is C.

A $2 Million Jumbo CD Is Paying a Quoted 3