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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 The penalty for early withdrawal from the CD is nine months of simple interest, calculated on the amount withdrawn.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. a. $46 b. $56 c. $128 d. $557

User Kokx
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2 Answers

3 votes

Answer:

penalty is 46

Explanation:

User JasonM
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2 votes

We have been given that 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 The penalty for early withdrawal from the CD is nine months of simple interest, calculated on the amount withdrawn.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 withdraws $2250 after one year. We are asked to find the amount of penalty.

We will use simple interest formula to solve our given problem.


I=Prt, where,

I = Amount of interest,

P = Principal amount,

r = Annual interest rate in decimal form,

t = Time in years.


2.75\%=(2.75)/(100)=0.0275

Since our given time is in months, so we need to convert 9 months into year.

1 year = 12 months

9 months =
(9)/(12)\text{ year}=0.75\text{ year}

Upon substituting our given values in simple interest formula, we will get:


I=\$2250* 0.0275* 0.75


I=\$46.40625

Upon rounding to nearest dollar, we will get:


I\approx \$46

Therefore, the penalty will be $46 and option 'a' is the correct choice.

User Attila Tanyi
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