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2 April, 11:12

Vanessa wants to buy a CD for $500 that earns 3% APR and is compounded quarterly. The CD matures in 2 years. Her interest earned will not be reinvested in the CD. What will Vanessa's total interest earned be at the date of maturation?

A. $30.00

B. $15.00

C. $60.00

D. $120.00

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  1. 2 April, 11:52
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    The correct answer is Choice A: 30.

    To find the amount of interest, we have to use the formula for compounded interest.

    It would be: y = 500 (1 + 0.03/4) ^ (8)

    We divided the 3% by 4 because it is quarterly. We raised it to the 8th power, because it will be compounded 8 times (4 x 2).

    The interest comes out to $30.80.
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