On February 1, John signed a contract to pay Janet $4,500 plus interest on April 2 and $5,500 plus interest on July 31. Both payments carried a 6.5% simple interest annually. Janet then sold both contracts to Fred on May 1 at a rate of 4.5% annually. Determine how much she received.
A) $10,145.20
B) $10,300.18
C) $10,451.07
D) $10,618.30
E) $11,863.54

Question

Quizplus · Accepted Answer

The correct answer is A.The amount of interest on the first payment is $4,500 * 6.5% * (April 2 - February 1) / 365 = $146.58. The amount of interest on the second payment is $5,500 * 6.5% * (July 31 - February 1) / 365 = $247.95. The total amount of interest is $146.58 + $247.95 = $394.53. The total amount of the payments is $4,500 + $5,500 = $10,000. The total amount that Janet received is $10,000 + $394.53 = $10,394.53. However, she sold the contracts to Fred at a rate of 4.5% annually, so she received $10,394.53 * (1 - 4.5% * (July 31 - May 1) / 365) = $10,145.20.

On February 1, John Signed a Contract to Pay Janet