An individual has purchased 275,000 worth of savings certificate. The certificate expires in 25 years and a simple interest rate is commuted quarterly at a rate of 3% per quarter. Interest checks are mailed to certificate holders every 3 months. The interest the individual can expect to earn every 3 months is...
To calculate the interest the individual will earn every 3 months, we need to determine the simple interest for each quarter.
The formula to calculate simple interest is:
Interest = Principal * Rate * Time
Given:
Principal = $275,000
Rate = 3% per quarter
Time = 1 quarter (since interest is being computed quarterly)
Using the formula, we can calculate the interest for each quarter:
Interest = $275,000 * 0.03 * 1 = $8,250
Therefore, the individual can expect to earn $8,250 in interest every 3 months.