Answer: $1398
Step-by-step explanation:
Given , Principal (P) = $12,500
Rate of interest for 1st year [tex](R_1)[/tex]= 12% =0.12
Rate of interest for 2nd year [tex](R_2)[/tex]= 15% =0.15
Rate of interest for 3rd year [tex](R_3)[/tex]= 18% =0.18
Interest for first year = [tex]I=P\times R_1\times T[/tex]
= [tex]12500\times 0.12\times 1[/tex]
= $1500
Now, For second year new principal [tex]P_2 = \$12,500+\$1,500 =\$14,000[/tex]
Interest for second year = [tex]I=P_2\times R_2\times T[/tex]
= [tex]14000\times 0.15\times 1[/tex]
= $2100
Now, For third year new principal [tex]P_3 = \$14000+\$2,100 =\$16,100[/tex]
Interest for third year = [tex]I=P_3\times R_3\times T[/tex]
= [tex]16100\times 0.18\times 1[/tex]
= $2898
Difference between the compound interest of the first year and the compound interest for the third year. = $2898 - $1500 = $1398
Hence, the difference between the compound interest of the first year and the compound interest for the third year is $1398 .
