Maturity value in two years-before tax interest

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Reference no: EM13149388

Freddy purchased a certificate of deposit for $20,000 on January 1,2010. The certificate's maturity value in two years (December 31,2011) is $22,050. yeilding 5% before-tax interest.

A) Freddy must recognize $2,050 gross income in 2011

B) Freddy must recognize $2,050 gross income in 2010

C) Freddy must recognize $1,000 (.05 x $20,000) gross income in 2010.

D) Freddy must recognize $1,025 ($2,050/2) gross income in 2010 and 2011

E) None of the above

Reference no: EM13149388

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