Suppose you buy a CD for $300 that earns 3% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds are

Question

3 years ago

15

Suppose you buy a CD for $300 that earns 3% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds are

withdrawn before the CD matures, the early withdrawal fee is 3 months' interest. What is the early withdrawal fee on this account?
A. $2.25
B. $6.00
C. $3.75
D. $1.25

Mathematics

1 answer:

klio [65] · Answer 1 · 2022-02-06T22:36:40+03:00

klio [65]3 years ago

4 0

Value of the CD after 3 months is given by 300(1 + 0.03 / 4) = 300(1 + 0.0075) = 300 x 1.0075 = $302.25.
Therefore, interest for 3 months = $302.25 - $300 = $2.25