Question: Sally Smith has been presented with an investment opportunity. She can invest her money in an account that pays a quarterly rate of 1.25%. Any money she invests must stay in the account for 6 years. If she withdraws it early she will pay a penalty of 10% of the amount of the investment.
a. The nominal interest rate
b. The annual effective interest rate
c. If Sally invests $15,000, how much will she have after 6 years?
d. If Sally invests $15,000, but withdraws it after 4 years how much will she withdraw?