Answered

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Jake opens a credit card with 18% annual interest compounded monthly. If he charges $800 on the card and never pays it off, how much will he owe the credit card company in 2
years? Round to the nearest cent.

Sagot :

Answer:  $1,143.60

Work Shown:

A = P*(1+r/n)^(n*t)

A = 800*(1+0.18/12)^(12*2)

A = 1,143.60224954321

A = 1,143.60

Notes:

  • P = 800 is the principal. It is the amount loaned to Jake.
  • r = 0.18 is the decimal form of the 18% interest rate
  • n = 12 because we're compounding monthly, i.e. 12 times a year
  • t = 2 = number of years
  • For more information, check out the compound interest formula.

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