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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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

Question

Mathematics

Guest

13 September, 17:06

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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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

+3

Answers (1)

Know the Answer?

Sanai Mccann · Answer 1

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

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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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. $2.25B. $6.00C. $3.75D. $1.25

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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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