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Orlando invests 16,000 in an eight-year CD bearing 6.5% simple annual interest,but needed to withdraw $3,500 after five years.If the CD's penalty for early withdrawal was one years worth of interest on the amount withdrawn, when the CD reached maturity,how much less money did Orlando earn total than if he had not made his early withdrawl

Respuesta :

Answer:

$5,585.93

Step-by-step explanation:

1. Calculate the money earned in the first 5 years: 16,000x(1.065)^5=$21,921.39

2. Subtract the $3,500 that Orlando withdrew: $21,921.39-$3,500=$18,421.39

3. Orlando loses the 6th year of his interest, so he only has 2 years of interest left.

4. Calculate another 2 years of interest Orlando earned: 18,421.39x(1.065)^2=$20,894.00

5. Subtract the original investment from the money to find the amount of money earned: $20,894-$16,000=$4,894

6. Calculate the money earned if Orlando did not make an early withdrawal: 16,000x(1.065)^8=$26,479.93

7. Subtract the original from the money to find the amount of money earned: $26,479.93-$16,000=$10.479.93

8. Now subtract the money actually earned from the money that was supposed to be earned: $10,479.93-$4,894=$5,585.93

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