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11 September, 11:21

Jolene entered an 18-month investment contract that guarantees to pay 2 percent interest at the end of 6 months, another 3 percent interest at the end of 12 months, and 4 percent interest at the end of the 18 month contract. If each interest payment is reinvested in the contract, and Jolene invested $10,000 initially, what will be the total amount of interest paid during the 18-month contract?

A. $506.00

B. $726.24

C. $900.00

D. $920.24

E. $926.24

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Answers (1)
  1. 11 September, 15:05
    0
    E. $926.24

    Step-by-step explanation:

    The total amount of interest paid is shown below:

    1. For 6 months, the interest would be

    = Invested amount * interest rate

    = $10,000 * 2%

    = $200

    2. For 12 months, the interest would be

    = (Invested amount + interest paid for 6 months) * interest rate

    = ($10,000 + $200) * 3%

    = $10,200 * 3%

    = $306

    3. For 18 months, the interest would be

    = (Invested amount + interest paid for 6 months + interest paid for 12 months) * interest rate

    = ($10,000 + $200 + $306) * 4%

    = $420

    Now the total interest would be

    = $200 + $306 + $420.24

    = $926.24
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