Gillian started a retirement account with $11500 when she turned 35. The account compounds interest quarterly at a rate of 3.83%. She made no further deposits into the account. After 20 years, she decided to withdraw 40% of what had accumulated in the account so that she could make her home handicap accessible. She had to pay a 10% penalty on the early withdrawal. What was her penalty?
So what happens is she starts with 11500$ and the interest accumulates quarterly at 3.83% then she will have 24,648.18$ in the account at the time of withdrawing this is found by using the formula a=p(1+r/n)^nt and you plugin in like so A=11500(1+3.83/4)^(4*20). So now she is withdrawing 40% which is .4*24648.18=9859.27$ is the amount she is withdrawing. Then its 10% penalty on that amount she is withdrawing which is 985.93$ is the penalty