Question

Doris put $4000 in a 5­year CD paying 6% interest compounded monthly. After 2 years, she withdrew all her money, and as an early withdrawal penalty, she paid back all the interest she made during the first year. How much money was Doris left with? Show your work.

Answer 1

Answer:  Doris was left with $4216.93.

Step-by-step explanation:

Since we have given that

Principal amount = $ 4000

Rate of interest = 6%

He put $4000 in a 5 year CD paying 6% interest compounded monthly.

After 2 years, she withdrew all her money.

so, Amount after 2 years when it is compounded annually.

$A=4000(1+\dfrac{6}{12\times 100})^{12\times 2}\\\\A=4000(1+0.005)^{24}\\\\A=4000(1.005)^{24}\\\\A=\ 4508.64$

As an early withdrawal penalty, she paid back all the interest she made during the first year.

$Interest=4000[(1+0.005)^{12}-1]\\\\Interest=\ 246.71$

Amount left with Doris is given by

$\ 4508.64-\ 246.71\\\\=\ 4261.93$

Hence, Doris was left with $4216.93.

Answer 2

For APEX it is going to be 4261.93