Sarah had been contributing $300 pre-tax per month to a retirement account that pays 2.16% interest compounded monthly. After 10 years, she needs to withdraw 25% of the money from her account. If the early withdrawal penalty is 10% of the amount withdrawn, how much will she have to pay?
a. $1,003.59 b. $40,143.57 c. $4,014.36 d. $10,035.89
Sergio plans to retire in 15 years. He would like to have $250,000 in his retirement account. If he invests in a plan that pays 4.69% interest compounded monthly, how much should he contribute monthly?
a. $138.89 b. $277.88 c. $959.77 d. $560.23
1.
The penalty amount will be applicable on the future value amount after 10 years
Penalty amount = $1,003.59
Correct choice A
2.
Since the interest is compounded monthly, we should compute the effective interest rate.
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