Orlando invested $16,000 in an eight-year CD bearing 6.5% simple annual interest, but needed to withdraw $3,500 after five years. If the CD’s penalty for early withdrawal was one year’s worth of interest on the amount withdrawn, when the CD reached maturity, how much less money did Orlando earn total than if he had not made his early withdrawal?

The $3,500 withdrawn after five years would have earned interest for the CD’s remaining three years: $3,500 × 0.065 × 3 = $682.50. The early-withdrawal penalty is one year of interest on that amount: $3,500 × 0.065 = $227.50. Adding the lost interest and the penalty gives $682.50 + $227.50 = $910.00, so Orlando earned $910.00 less (choice c).

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