Suppose you buy a CD for $400 that earns 2.5% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds a

Question

3 years ago

15

Suppose you buy a CD for $400 that earns 2.5% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds a

re withdrawn before the CD matures, the early withdrawal fee is 3 months' interest. What is the early withdrawal fee on this account?
A. $6.25
B. $2.50
C. $1.25
D. $3.13

Mathematics

2 answers:

Step2247 [10] · Answer 1 · 2022-03-13T19:21:59+03:00

Step2247 [10]3 years ago

7 0

The withdrawal fee will not take the compund rate, so, you should apply the usual formula for not compound rate, <span>
400⋅0.025/12⋅3=2.50

</span><span>Where we divide the APR to adapt to a monthly base, and then multiply the number of months.</span>

Reika [66] · Answer 2 · 2022-03-13T20:48:48+03:00

Reika [66]3 years ago

3 0

The answer is $2.50