Question

Personal finance chapter 5. A Cerificate of desposit will often result in a penalty for withdrawing funds beofre the maturityy date. If the penalty involves a two month of intertest, what would be the amount for early withdrawal on a $20,000, 4 percent CD

Answer 1

Answer:

The penalty will be $133.333 for the early withdrawal.

Explanation:

On a $20,000 earning 4% annually, the amount of interest earned per year is:  

$ 20 , 000  x 4%  =  $ 800

On a monthly basis, the CD earns:

$ 800  / 12  =  $ 66.667

If the penalty involves a two (2) months worth of interest, then, the penalty for the early withdrawal will be:

2  x  $ 66.667  =  $ 133.333