Certificate a Pays $1,200 in Six Months and $1,100 in One

question 20

Short Answer

Certificate A pays $1,200 in six months and $1,100 in one year. Certificate B pays $1,150 in three months and $1,150 in one year. If the current rate of return required is 6.75% simple interest, which option pays the most interest and by how much?

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Definitions:

Electronic Funds Transfer

A digital transaction method where money is transferred from one account to another without the physical exchange of cash.

Drawer

A compartment for holding or storing items, or in financial terms, the person who writes a bill of exchange or check.

Payee

The party to whom payment of a promissory note is to be made.

Drawee

The party in a transaction who is directed to pay a certain amount of money, often seen in the context of a check or draft.