Expert: Paul Klarreich - 9/5/2007

Question
Hi Mr.Klarreich,
    My question is if I put 5,000 dollars into a bank cd investment for nine months and the APR is 5.25 percent, how much will I make during those nine months.

Answer
Questioner:   Ryan
Category:  Advanced Math
 
Subject:  APR
Question:  Hi Mr.Klarreich,
   My question is if I put 5,000 dollars into a bank cd investment for nine months and the APR is 5.25 percent, how much will I make during those nine months.
......................................
Hi, Ryan,

You have left out a piece of information -- what is the compounding interval, if any.  If there isn't one, then use the simple interest formula:

I = Prt, where

I = the interest earned, in dollars.
P = the Principal amount ($5000)
r = the interest rate per year (0.05)
t = the time period in years  (0.75)

So, I = $5000 (0.05) (0.75) and you can use your calculator for that.

IF, however, your cd gets compound interest, compounded at some period, things become more complex.  (discussion on request.)