Question

A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves two months of interest, what would be the amount for early withdrawal on a CD paying 5 percent and valued at $24,000? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

The amount for early withdrawal is $204

Explanation:

Annual interest rate = 5% = 0.05

Investment = $24,000

Annual interest rate * Investment = Annual interest

0.05 * $24,000 = $1,200

Penalty = Two months of interest

(months/months in a year) * Annual interest

(2/12) * $1,200 = 0,17

0,17 * $1,200 = $204,00