Irene invested $27,000 in a twelve-year CD bearing 8.0% interest, but needed to withdraw $6,000 after three years. If the CD’s penalty for early withdrawal was eighteen months’ worth of interest on the amount withdrawn, when the CD reached maturity, how much less money did Irene earn total than if she had not made her early withdrawal?

The $6,000 she withdrew would have earned interest for the remaining 9 years of the CD. At 8% simple interest, that is $6,000 × 0.08 × 9 = $4,320. The penalty was another 18 months of interest: $6,000 × 0.08 × 1.5 = $720. Altogether, Irene earned $4,320 + $720 = $5,040 less, which is choice D, $5,040.

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