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