16
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Question 16 • Financial Math - MA2007

A bank offers a four year cd with an interest rate of 2.75%. The penalty for early withdrawal from the CD is nine months of simple interest, calculated on the amount withdrawn. Rachel invests $6,200. If she withdraws $2250 after one year, how much will the penalty be? Round answer to the nearest dollar.

Answer
A
$46
B
$56
C
$128
D
$557

Explanation

The penalty is nine months of simple interest on the amount withdrawn, $2,250. Convert nine months to 9/12 of a year and calculate $2,250 × 0.0275 × (9/12) = $46.41, which rounds to $46. The correct choice is $46.

AI-written and checked against the verified answer.