question 4 of 10\nlana wants to deposit $800 in a certificate of deposit for a maximum of one year. the bank…

question 4 of 10\nlana wants to deposit $800 in a certificate of deposit for a maximum of one year. the bank offers her four options. which offer would earn lana the most interest?\na. a three - year certificate of deposit with a nominal interest rate of 3 percent.\nb. a one - year certificate of deposit with a nominal interest rate of 3 percent.\nc. a one - year certificate of deposit with a nominal interest rate of 2 percent.\nd. a three - year certificate of deposit with a nominal interest rate of 4 percent.

Answer

Explanation:

Step1: Recall simple - interest formula

The simple - interest formula is $I = Prt$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the time in years. Here, $P=$800$ and we want to find the option with the highest $I$.

Step2: Convert interest rates to decimals and calculate interest for each option

Option A: $t = 3$ years, $r=0.03$, $I_A=800\times0.03\times3 = 800\times0.09=$72$.
Option B: $t = 1$ year, $r = 0.03$, $I_B=800\times0.03\times1=$24$.
Option C: $t = 1$ year, $r = 0.02$, $I_C=800\times0.02\times1=$16$.
Option D: $t = 3$ years, $r = 0.04$, $I_D=800\times0.04\times3=800\times0.12=$96$.

Answer:

D. A three - year certificate of deposit with a nominal interest rate of 4 percent.