Question

John needs $3,000. He is withdrawing the money today from a $3,000 certificate of deposit (CD) which will reach maturity in six months. It is likely that he will have to

Answer 1

pay the bank an early withdrawal penalty.

Step-by-step explanation:

Depending on the bank, now long was the original CD and the amount of money, the penalties may a include a certain percentage of the total amount, not earn any interest, or some other type of fee.

Banks do this to encourage depositors to leave the money the longest possible time in the bank. Sometimes banks will give their clients a small bonus interest for renewing CDs.