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Answer :
To find out how much interest is earned on a certificate of deposit (CD) with a fixed maturity, we can use the formula for simple interest. The formula is:
[tex]\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \][/tex]
Let's break down the steps using the given values:
1. Principal (Initial Investment): The amount of money initially invested is \[tex]$940.
2. Annual Interest Rate: The interest rate given is 2.6%, which we convert to a decimal for calculation purposes. To do this, divide by 100:
\[ 2.6\% = \frac{2.6}{100} = 0.026 \]
3. Time (in Years): The CD has a maturity of 2 years.
Now, substitute these values into the simple interest formula:
\[ \text{Interest} = 940 \times 0.026 \times 2 \]
4. Calculate the Interest Earned:
\[ \text{Interest} = 940 \times 0.026 \times 2 = 48.88 \]
So, the interest earned on the CD over the 2-year period is \$[/tex]48.88.
[tex]\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \][/tex]
Let's break down the steps using the given values:
1. Principal (Initial Investment): The amount of money initially invested is \[tex]$940.
2. Annual Interest Rate: The interest rate given is 2.6%, which we convert to a decimal for calculation purposes. To do this, divide by 100:
\[ 2.6\% = \frac{2.6}{100} = 0.026 \]
3. Time (in Years): The CD has a maturity of 2 years.
Now, substitute these values into the simple interest formula:
\[ \text{Interest} = 940 \times 0.026 \times 2 \]
4. Calculate the Interest Earned:
\[ \text{Interest} = 940 \times 0.026 \times 2 = 48.88 \]
So, the interest earned on the CD over the 2-year period is \$[/tex]48.88.
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