If you charge $500 on a credit card today, how much will the balance be in two years (assuming no additional fees) if the credit card has a 10% APR that is compounded - a. once a year? b. once a month? c. once a week?

Question

Jordin Mcdaniel

Mathematics

19 January, 04:23

If you charge $500 on a credit card today, how much will the balance be in two years (assuming no additional fees) if the credit card has a 10% APR that is compounded - a. once a year? b. once a month? c. once a week?

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Answers (1)

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Ryann Pollard · Answer 1

Simple interest: i = p * r * t; compound interest would be A=p (1+r/n) ^ (nt)

Here, A = $500 (1.10) ^2 = $605 (answer for "once per year."

Once per month:

A = $500 (1 + 0.10/12) ^ (12*2) = $610.20

Once per week: Can y ou figure that out? # of compounding periods is 12 per year in this problem.