Suppose you buy a cd for $500 that earns 3% apr and is compounded quarterly. the cd matures in 3 years. assume that if funds are withdrawn before the cd matures, the early withdrawal fee is 3 months' interest. what is the early withdrawal fee on this account?
a. $5.00
b. $2.50
c. $1.25
d. $3.75

The correct option is D. $3.75  

Step-by-step explanation:

Principal Value, P = $500

Rate of interest, r = 3%

                          = 0.03

Time, t = 3 months

n = number of times the interest is compounded

⇒ n = 4

Now, Withdrawal fee = Amount paid - Principal value

⇒ Withdrawal fee = 503.75 - 500

⇒ Withdrawal fee = $3.75

Hence, The correct option is D. $3.75

D. $3.75

Step-by-step explanation:

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