If You Invest $10,000 in a 4-Year Certificate of Deposit

question 56

Multiple Choice

If you invest $10,000 in a 4-year certificate of deposit (CD) paying 10 percent interest compounded annually, determine how much the CD will be worth at the end of 4 years.

• A) $13,600
• B) $45,730
• C) $14,640
• D) $15,958

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Definitions:

Deductible

An expense that can be subtracted from gross income to reduce the amount of taxable income.

Tax Return

A document filed with a tax authority reporting income, expenses, and other pertinent tax information. Tax returns are mandatory to accurately report one’s income tax liability.

Home Mortgage Interest

Interest paid on a loan secured by a principal residence or a second home, which can be deductible on federal income tax returns under certain conditions.

Form 1098

A tax form that reports the amount of interest and related expenses paid on a mortgage during the tax year.