Adam invested $12,000 in a six-year CD that paid 7.1% interest, but later needed to withdraw $2,500 early. If the CD’s penalty for early withdrawal was eighteen months’ worth of interest on the amount withdrawn, how much of a penalty did Adam pay?
a.
$138.89
b.
$177.50
c.
$266.25
d.
$319.50

Question

Adam invested $12,000 in a six-year CD that paid 7.1% interest, but later needed to withdraw $2,500 early. If the CD’s penalty for early withdrawal was eighteen months’ worth of interest on the amount withdrawn, how much of a penalty did Adam pay?
a.
$138.89
b.
$177.50
c.
$266.25
d.
$319.50

anonymous · Answer

18 months is 1.5 years = (1.5)(7.1%) = 10.65%
(2500)(.1065) = answer