Please, help me out with this.

Question

Devin invested $750 in a CD that pays 6% simple interest, calculated quarterly. How much money will Devin earn in 3 years?
A. $75

B. $125

C. $135

D. $50

Answer 1

A (3) = 750(1+0.06/4)^(4*3)  = $896.71

 

using the formula for n = 4 compoundings per year, t = 3 years, with principal $750.  The total interest earned in that 3 year period would be the difference, 896.71 - 750 = $146.71.

 

That's the way it ought to work.  But that assumes compounding.

 

The way your question is worded, simple interest is $11.25. If that is NOT accumulated, but paid out as a separate 'dividend', then over a 3 year period there's be 12 such payments, totaling 12 * 11.25 = $135.  So evidently C is your answer. 

 

BUT THAT'S NOT THE WAY CD INVESTMENTS WORK, in my experience!