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How much interest is earned on a CD with a 2-year fixed maturity if the initial investment is [tex]$\$940$[/tex] and the annual interest rate is [tex]$2.6\%$[/tex]?

[tex]\text{Interest} = \$[/tex][?]

Round your answer to the nearest hundredth.

Answer :

To find out how much interest is earned on a Certificate of Deposit (CD) with a 2-year fixed maturity, we'll use the simple interest formula. The given information includes:

- Initial Investment (Principal) = [tex]$940
- Annual Interest Rate = 2.6%
- Time = 2 years

The simple interest formula is:

\[
\text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time}
\]

First, we need to convert the annual interest rate from a percentage to a decimal. This is done by dividing the percentage by 100:

\[
\text{Rate} = \frac{2.6}{100} = 0.026
\]

Next, we'll substitute the given values into the simple interest formula:

\[
\text{Interest} = 940 \times 0.026 \times 2
\]

Now, we calculate the interest:

1. Multiply the principal by the rate:

\[ 940 \times 0.026 = 24.44 \]

2. Multiply the result by the time in years:

\[ 24.44 \times 2 = 48.88 \]

Therefore, the interest earned on the CD over 2 years is $[/tex]48.88 when rounded to the nearest hundredth.

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