Freddy purchased a certificate of deposit for $20,000 on July 1, 2018. The certificate's maturity value in two years (June 30, 2020) is $21,218, yielding 3% before-tax interest.

a. Freddy must recognize $1,218 gross income in 2020.

b. Freddy must recognize $300 (.03 × $20,000 × .5) gross income in 2018.

c. Freddy must recognize $1,218 gross income in 2018.

d. Freddy must recognize $600 (.03 × $20,000) gross income in 2020.

e. None of these choices are correc

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