Tony invested $5,500 in a four-year cd that paid 4.8% interest, but later needed to withdraw $475 early. if the cd’s penalty for early withdrawal was three months’ worth of interest on the amount withdrawn, how much of a penalty did tony pay?   a. $5.70 b. $22.80 c. $60.30 d. $66.00  

Option A - $5.70

Step-by-step explanation:

Given : Tony invested $5,500 in a four-year CD that paid 4.8% interest, but later needed to withdraw $475 early. If the CD’s penalty for early withdrawal was three months’ worth of interest on the amount withdrawn.

To find : How much of a penalty did Tony pay?

Solution :

We find the interest on the penalty,

Amount withdraw = $475

Interest rate = 4.8%=0.048

Penalty Time = 3 months = 3/12 years

The amount of penalty is $5.70

Therefore, Option A is correct.

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