Laurie bought a 5-year CD for $6800 with an APR of 2.8%, compounded quarterly, but she wants to take all her money out 9 months early. The early redemption fee for the CD is 3 months' interest on the original principal. Help Laurie determine how much money she will end up earning in interest on the CD.

What is the periodic interest rate of Laurie's CD? How many quarters will Laurie have kept her money in the CD before she takes all her money out?

How much will Laurie's CD be worth when she takes all her money out (before the fee is applied)?

How much will Laurie have earned in interest before the fee is applied?

How much will Laurie get charged as an early redemption fee for taking all her money out 9 months early?

How much will Laurie have earned in interest after the fee is applied?

Given:
5-year CD for $6800 with an APR of 2.8%, compounded quarterly,
Pretermination - 9 months early.
Pretermination fees - The early redemption fee for the CD is 3 months' interest on the original principal.

To get the periodic rate, APR must be divided by the number of days either 360 or 365 then multiplied by 30 for monthly rate.

2.8% / 360 = 0.0078%
0.0078% x 30 = 0.2333%
0.2333% x 3 = 0.70% PERIODIC RATE (QUARTERLY RATE)

5 years * 4 quarters = 20 quarters
9 months * 1 qtr/ 3mos = 3 quarters
20 quarters - 3 quarters = 17 quarters that Laurie kept her CD.

A = P(1+r/n)^nt
A = 6,800 (1+0.007)^17
A = 6,800 (1.1259)
A = 7,656.1408 - Value of Laurie's money before pretermination

Interest earned: 7,656.1408 - 6,800 = 856.1408

Early redemption fee: 6,800 x 0.7% = 47.60

Net interest earned: 856.1408 - 47.60 = 808.5408 or 808.54