Question

Gabrielle wants to buy a CD for $300 that earns 3% APR and is compounded quarterly. The CD matures in 5 years and the early redemption fee is 3 months' interest. If Gabrielle wants to take her money out 3 months before the CD matures, how much money would she get back, after the early redemption fee?

Answer 1

Answer:

$343.51

Step-by-step explanation:

300(.03/4) Gives you 2.25 that will be the penalty paid for withdrawing early.

Now, set up the equation 300(1+.03/4)^20 which will give you 348.25

You then take 2.25 and multiply it by two, as she withdrew the money 3 months before causing her to lose out on one compound, and has a penalty of 2.25 for withdrawing early.

348-5 = 343

Answer 2

The early withdrawal fee is $2.25.

What is the penalty for early withdrawal on a savings account?

The penalty is usually about 3 months' worth of interest, but it can be as much as a year's interest.

Given

             Value of the CD after 3 months is = 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

Learn more about early withdrawal https://brainly.com/question/3344809 here

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