To determine how much interest is earned on a Certificate of Deposit (CD) with a 2-year fixed maturity, an initial investment of [tex]$800, and an annual interest rate of 3%, follow these steps:
1. Identify the given values:
- Initial investment (Principal), \( P = \$[/tex] 800 \)
- Annual interest rate, [tex]\( r = 3\% = 0.03 \)[/tex]
- Time period, [tex]\( t = 2 \text{ years} \)[/tex]
2. Use the simple interest formula:
The formula for calculating simple interest is:
[tex]\[
\text{Interest} = P \times r \times t
\][/tex]
3. Substitute the given values into the formula:
[tex]\[
\text{Interest} = 800 \times 0.03 \times 2
\][/tex]
4. Calculate the interest:
[tex]\[
\text{Interest} = 800 \times 0.03 = 24
\][/tex]
[tex]\[
\text{Interest} = 24 \times 2 = 48
\][/tex]
5. Round the result to the nearest hundredth:
The calculated interest, [tex]$48, is already a round number and does not require further rounding.
Hence, the interest earned on the CD over the 2-year period is \$[/tex]48.00, rounded to the nearest hundredth.
