# Early withdrawal fee for compound interest CD investment

Suppose you buy a CD for $1000 that earns 2.5% APR and is compounded quarterly. The CD matures in 5 years. Assume that if funds are withdrawn before the CD matures, the early withdrawal fee is 3 months' interest. What is the early withdrawal fee on this account? 1. \$1.25
2. \$3.75 3. \$3.13
4. \\$6.25
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Please avoid titles in full caps, also try to make your titles hint on the content of the post. –  Asaf Karagila Dec 18 '12 at 0:17
Wouldn't the amount depend on when the early withdrawal occurred? (One of the choices gives the smallest possible value it could be.) –  David Mitra Dec 18 '12 at 0:49