Question

Bill casler bought a $9000, 9-month certificate of deposit (cd) that would earn 8% annual simple interest. Three months before the cd was due to mature, bill needed his cd money, so a friend agreed to lend him money and receive the value of the cd when it matured. (a) what is the value of the cd when it matures

Answer 1

$9540 is the value of the cd when it matures

Explanation:

The formula for calculating simple interest is: P×n×r/100  Where: P=Principle n=term of the deposit r=interest rate.

• So in Bill casler case Principle = $9000, Term = 9/12 year, and Interest Rate = 8%
• By applying simple interest formula for the above case , Simple Interest = 9000*9/12*8/100 =540

Maturity Amount = Principle + Interest

• Maturity Amount = 9000 + 540 = 9540

So $9540 is the value of the Bill casler cd when it matures.