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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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

@John_ES @sierraabel @CarlosGP

Question

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 Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest.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

@John_ES  @sierraabel @CarlosGP

john_es · Answer

I would try this solution. The withdrawal fee will not take the compund rate, so, you should apply the usual formula for not compund rate,
$$400\cdot0.025/12\cdot3=2.50$$Where we dividie the APR to adapt to a monthly base, and then multiply the number of months.

anonymous · Answer

ooo ok