Suppose you buy a cd for $250 that earns 3% apr and is compounded quarterly. the cd matures in 5 years. assume that if funds are withdrawn before the cd matures, the early withdrawal fee is 3 months interest. what is the early withdrawl fee on this account? a. $1.88 b. $2.25 c. $3.75 d. $3.19

Since we are given the annual interest, we are to divide it by the interest period, which is quarterly, or every 3 months. This is done by dividing 3% by 4, which is (0.03/4 = 0.0075). Since the withdrawal fee is 3 months' interest, then we simply have to multiply 0.0075 to the principal amount. This is shown below:

$250 * 0.0075 = 1.875 = 1.88

Therefore, the early withdrawal fee is $1.88.

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