Question

If you withdraw part of your money from a certificate of deposit before the date of maturity, you must pay an interest penalty. Suppose you invested $7000 in a one-year certificate of deposit paying 8.6% interest. After 6 months, you decide to withdraw $7000. What interest penalty do you pay?

a. 1.5% of $7000
b. 3% of $7000
c. 4.3% of $7000
d. 8.6% of $7000

Answer 1

If you withdraw part of your money from a certificate of deposit before the date of maturity, you typically have to pay an interest penalty. In this case, the investor withdraws $7000 from a one-year certificate of deposit after 6 months. The interest penalty is 1.5% of $7000 option a.

Step-by-step explanation:

When you withdraw part of your money from a certificate of deposit before the date of maturity, you typically have to pay an interest penalty. In this case, you have invested $7,000 in a one-year certificate of deposit with an 8.6% interest rate. After 6 months, you decide to withdraw the full $7,000. The interest penalty you would have to pay is determined by the terms of the certificate of deposit.

To calculate the interest penalty, you need to know the terms set by the bank. Let's say the bank charges a penalty of 1.5% of the withdrawn amount for early withdrawal. In this case, the interest penalty would be 1.5% of $7,000, which equals $105.

Therefore, the correct answer is a. 1.5% of $7000.