Dion is supposed to pay Kristy $3500 on April 20, but delays the payment until July 1. What amount should Dion expect to pay on July 1, if Kristy can earn 8.25% on a low-risk investment?
A) $3788.75
B) $3557.75
C) $3556.96
D) $3556.17
E) $3500

Question

Quizplus · Accepted Answer

To calculate the amount Dion should pay on July 1, we need to calculate the amount that Kristy could earn on the $3500 if she invested it at a rate of 8.25% for the period from April 20 to July 1.

First, we need to determine the length of the period between April 20 and July 1. There are many ways to do this, but one possible method is to count the number of days from April 20 to the end of April (10 days), then add the number of days in May (31) and June (30). This gives a total of 71 days.

Next, we need to calculate the interest earned on the $3500 over 71 days at a rate of 8.25%. To do this, we can use the formula:

Interest = Principal x Rate x Time
where Principal is the amount invested, Rate is the interest rate (in decimal form), and Time is the length of time (in years).

In this case, Principal = $3500, Rate = 0.0825, and Time = 71/365 (since the rate is an annual rate and the time is in days). Plugging these values into the formula, we get:

Interest = $3500 x 0.0825 x (71/365)
Interest = $56.96

Therefore, Dion should expect to pay Kristy $3500 + $56.96 = $3556.96 on July 1. The correct answer is (C).

Dion Is Supposed to Pay Kristy $3500 on April 20