SOLUTION: how much interest 25,000 earns in 2 years in a certificate of deposit paying 7.5% interest compounded quarterly

Question 715544: how much interest 25,000 earns in 2 years in a certificate of deposit paying 7.5% interest compounded quarterly
Answer by DrBeeee(684) (Show Source): You can put this solution on YOUR website!
The total balance is given by
(1) B = 25000*(1 + 0.075/4)^(4*2) or
(2) B = 25000*(1.01875)^8 or
(3) B = 25000*(1.1602217) or
(4) B = 29005542
The interest earned is (4) minus the 25000 or
(5) I = 4005.5418
Answer: The interest earned on the $25,000 CD is $4005.54 or about 16.02%.
Note in (1) you divide the annual rate by 4 to get the quarterly rate and use an exponent equal to the number of quarters in the 2 year period of time.
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