inancial problem homework chapters 1-4 Question 16 (of 20) > 6. value: 2.50 poin

Question

inancial problem homework chapters 1-4 Question 16 (of 20) > 6. value: 2.50 points Problem 4-8 (LO4.3) A certificate of deposit often charges a penalty for withdrawing funds before the maturity date. If the penalty involves two months of interest, what would be the amount for early withdrawal on a $18,000, 7 percent CD? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Early withdrawal penalty $ References eBook & Resources Worksheet Difficulty: 1 Basic Problem 4-8 (LO4.3) Learning Objective: 04-03 Assess various types of savings plans.

Explanation / Answer

Banks use different formulas for calculating Early Withdrawal penalty.

If the bank calculates penalty on monthly basis then the formula is:

Early Withdrawal penalty = Amount withdrawn * Interest rate / 12 * Number of months' interest

Early Withdrawal penalty = 18000 * (.07 / 12) * 2

Early Withdrawal penalty = $210

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.