The table below shows the future value of a certificate of deposit(cd), after x years. andrea states the applied interest simple interest. true or false
Answers
Given : the future value of a certificate of deposit(cd), after x years
andrea states the applied interest simple interest.
To Find : True or False
Solution:
In simple interest , Interest every year will be calculate don initial value
hence interest will be same every year hence same increase in value every year
x - Years future Value Interest Earned
1 $517.50
2 $535.00 $535.00 - $517.50 = $17.50
3 $552.50 $552.50 - $535.00 = $17.50
4 $570.00 $570.00 - $552.50 = $17.50
5 $587.50 $587.50 - $570.00 = $17.50
Interest Earned Each year is Same Hence applied interest is simple interest
TRUE
Additional info :
Interest earned every year = $17.50
Amount after 1 year = $517.50
Hence Principal Amount = $517.50 - $17.50 = $500
Interest Rate = R
500 x R x 1 / 100 = 17.50
=> R = 17.50 /5
=> R = 3.5 % Simple interest
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Answer:
itz true