Question

assume that a 3 month CD purchased for $2000 pay a simple interest at an annual rate of 10%. How much total interest does it earn ? What is the balance at maturity?

Answer 1

CD = certificate of deposit (an investment)
Interest rate, i = 10% per annum (simple interest)
Principal, P = $2000 (present value)
Period, T = 3 months = 0.25 year

Simple interest formula
Interest earned = Pit
=2000*0.10*0.25
=$50

Balance at maturity (amount that investor gets after three months)
=$2000+$50
=$2050

Answer 2

How much total interest does it earn is $50

The balance at maturity is $2,050

a) Total Interest

Using this formula

Total interest=P×R×T

Where:

P=Principal

R=Rate

T=Time

Let plug in the formula

Total Interest=2000×10%×3/12

Total Interest=2000×10%×0.25

Total Interest=$50

b. Balance at maturity

Using this formula

Balance in maturity=CD amount + Total Interest

Let plug in the formula

Balance in maturity =$2000+$50

Balance in maturity =$2050

Inconclusion:

How much total interest does it earn is $50

The balance at maturity is $2,050

Learn more here:

https://brainly.com/question/24021829