Aidan is trying to save money and has $1800 to set aside in some type of savings acount. He checked his bank one day, and found that the rate for a 12-month CD had an annual percentage yield (APY) of 4.25%. The interest rate on his savings account was 2.75% APY. How much more simple interest would Aidan earn if he invested in a CD for 12 months rather than leaving the 1800 in his savings.

I got $2700 and it is supposed to be $27

Question

Aidan is trying to save money and has $1800 to set aside in some type of savings acount. He checked his bank one day, and found that the rate for a 12-month CD had an annual percentage yield (APY) of 4.25%. The interest rate on his savings account was 2.75% APY. How much more simple interest would Aidan earn if he invested in a CD for 12 months rather than leaving the 1800 in his savings.

I got $2700 and it is supposed to be $27

anonymous · Answer

usually, he would get
$1800 * (1 + 0.0275) = $1800 + $49.5

in the other savings account, he gets:
$1800 * (1 + 0.0425) = $1800 + $76.5

The difference:
$76.5 - $49.5 = $27

You probably did not divide the interest rate by 100.
to get the 0.0xx numbers, I took the % and divided by 100

e.g.
2.75% -> coefficient to use is 2.75%/100 = 0.0275

anonymous · Answer

Thanks, I did not divide instead I multiplied. Why?  bcause that seems to be the theme this weekend :)

anonymous · Answer

:)