Question

Questions 6-8. Lori buys a $1500 certificate of deposit (CD) that earns 6% interest that compounds monthly. How much will the CD be worth in:How much will the CD be worth after 10 years using simple interest?

Answer 1

Using the following formula for simple interest:

$\begin{gathered} V=V_0(1+rn), \\ w\text{here V}_{0\text{ }}is\text{ the initial amount, r is the interest rate, and n is the number of times } \\ \text{the rate is applied.} \end{gathered}$

Substituting r=0.06, V₀=1500, and n=10*12=120 we get:

$V=1500(1+0.06(120))=1500(1+7.2)=1500(8.2)=12300.$

Therefore after 10 years, using simple interest, the CD will be worth $12,300.

Answer:

After 10 years, using simple interest, the CD will be worth $12,300.