The Export Development Corp

Multiple Choice

The Export Development Corp. (EDC) offered a $500,000 startup loan to qualifying entrepreneurs. For year one of the loan, it was interest and payment free. Subsequently, there was a two-year period where interest only payments were made at the end of each year. In Year 4, both interest and principal payments were made. The loan had to be repaid at the end of Year 8. If the interest rate charged in years 2 through 8 remained at 8% compounded annually, what was the total interest paid on the entire EDC loan.

A) $33,026
B) $32,000
C) $246,894
D) $120,494
E) $206,143