Final answer:
A certificate of deposit (CD) earns interest over a specific period of time. The interest earned is usually stated as an annual percentage rate (APR).
Step-by-step explanation:
A certificate of deposit (CD) earns interest over a specific period of time. The interest earned is usually stated as an annual percentage rate (APR). For example, if a CD has an APR of 0.75, it means that the CD will earn 0.75% interest per year. This interest is typically paid out at regular intervals, such as monthly or annually.
Let's say you invest $1,000 in a CD that has an APR of 0.75. After one year, you would earn $7.50 in interest ($1,000 x 0.75%). This interest is added to the original amount, resulting in a total balance of $1,007.50.