To calculate the total amount the senior in college will have to pay after one year, we can use the formula for compound interest:
A = P(1 + r/n)^(nt)
Where:
A = the future value of the investment/loan, including interest
P = the principal investment amount (initial charge on the credit card)
r = annual interest rate (23% or 0.23)
n = number of times the interest is compounded per year (monthly compounding means n = 12)
t = time the money is invested/borrowed for (1 year)
Plugging in the values:
A = $1700(1 + 0.23/12)^(12*1)
A = $1700(1 + 0.019167)^12
A = $1700(1.019167)^12
A = $1700(1.238218)
A = $2107.771
Therefore, the senior in college will have to pay approximately $2,107.77 after one year of charging $1700 on the credit card.
A bank credit card charges interest at the rate of 23% per year, compounded monthly. If a senior in college charges $1700
to pay for college expenses, and intends to pay it in one year, what will he have to pay?
Round your answer to the nearest cent.
1 answer