To determine how much interest is earned on a Certificate of Deposit (CD) with a fixed 2-year maturity, an initial investment of \[tex]$620, and an annual interest rate of 2.7%, we can follow these steps:
1. Identify the key values:
- Initial investment (Principal) \( P = \$[/tex]620 \)
- Annual interest rate [tex]\( r = 2.7\% \)[/tex] or [tex]\( 0.027 \)[/tex] when expressed as a decimal.
- Number of years [tex]\( t = 2 \)[/tex]
2. Determine the formula to be used:
For simple interest, the formula to calculate interest is:
[tex]\[
I = P \times r \times t
\][/tex]
where:
[tex]\( I \)[/tex] is the interest,
[tex]\( P \)[/tex] is the principal amount (initial investment),
[tex]\( r \)[/tex] is the annual interest rate in decimal form,
[tex]\( t \)[/tex] is the time the money is invested for, in years.
3. Substitute the given values into the formula:
[tex]\[
I = 620 \times 0.027 \times 2
\][/tex]
4. Perform the multiplication:
- First, multiply the initial investment by the interest rate:
[tex]\[
620 \times 0.027 = 16.74
\][/tex]
- Then, multiply the result by the number of years:
[tex]\[
16.74 \times 2 = 33.48
\][/tex]
5. Conclude the calculation:
The interest earned on the CD over 2 years is \[tex]$33.48.
Therefore, the interest earned on a CD with a 2-year fixed maturity, an initial investment of \$[/tex]620, and an annual interest rate of 2.7% is:
[tex]\[
\text{Interest} = \$33.48
\][/tex]
