Question

Terrell invested $1000 into a 3-year CD that earns 4% APR and is compounded quarterly. The early redemption fee is 3 months' interest. Terrell needed to take out his money 3 months before the CD matured. How much money did he receive after the early redemption fee was taken out?

Answer 1

1,114.86

Step-by-step explanation:

Answer 2

$1,114.86

Step-by-step explanation:

$1,000 in a 3 year CD

total amount received if CD cashed on maturity = $1,000 x (1 + 4%)³ = $1,124.86

total interest = $1,124.86 - $1,000 = $124.86

penalty = interest for 3 months = 4% x 3/12 = 1% ⇒ $1,000 x 1% = $10

total money received = principal + earned interest - penalty = $1,000 + $124.86 - $10 = $1,114.86