Answer:
A. $7.17
Step-by-step explanation:
We have been given that a mechanic uses his credit card to pay for a compressor that costs $477.95 and does not pay on it until the second month.
We will use compound interest formula to solve our given problem.
where,
A = Final amount after T years,
P = Principal amount,
r = Annual interest rate in decimal form,
n = Periods of compounding,
T = Time in years.
Let us multiply our given rate by 12 to get APR and convert it in decimal form.
Since 1 year equals 12 months, so 1 month will be 1/12 year.
Upon substituting our given values in above formula we will get,
Now let us subtract principal amount from the final amount to get the monthly interest charge at the end of 1st month.
Therefore, the monthly interest charge be at the end of the first month will be $7.17 and option A is the correct choice.