A bank is offering you an introductory credit card promotion. Your interest for the first year is 8%. But, at the beginning

of the 2nd year your interest rate will go up to 23%. If you have an $1,800 balance on your card throughout both years, what will be the

difference in the monthly interest owed during year 1 and year 2?

O a) $10.80

Ob) $15.66

O c) $22.50

O d) $34.50

c) $22.50

Explanation:

1. Calculate the monthly interest owed during year 1

Interest for first year: 8%

The monthly rate is the yearly rate divided by 12: 8% / 12 = 0.08/12

The monthly interest owed is the monthly rate times the balance: (0.08/12) * $1,800 = $12.00

2. Calculate the monthly interest owed during year 2

Interest for second year: 23%

The montly rate is the yearly rate divided by 12: 23% / 12 = 0.23/12

The monthly interest owed is the monthly rate times the balance: (0.23/12) * $1,800 = $34.50

3. Calculate the difference

Difference in the monthly interest owed during year 1 and year 2 = $34.50 - $12.00 = $22.50

Hence, the answer is the option c) $22.50