Question

Barney has a balance of $780 on a credit card with an APR of 31.3%, compounded monthly. About how much will he save in interest over the course of a year if he transfers his balance to a credit card with an APR of 19.1%, compounded monthly? (Assume that Barney will make no payments or new purchases during the year, and ignore any possible late-payment fees.)

Answer 1

Barney can save
$119.66
in interest over the course of a year if he transfers his balance to a credit
card with an APR of 19.1%, compounded monthly. The correct answer between all
the choices given is the first choice or letter A.

Answer 2

Answer:

Barney will save about $119.66.

Step-by-step explanation:

The compound interest formula is:

A=$p(1+\frac{r}{n})^{nt}$

Case 1:

when p = 780

r = 0.313

n = 12

t = 1

Putting the values in formula:

$780(1+\frac{0.313}{12})^{12}$

A = $1.36204\times780=1062.39$dollars

Interest accured = $1062.39-780=282.39$ dollars

Case 2:

when p = 780

r = 0.191

n = 12

t = 1

Putting the values in formula:

$780(1+\frac{0.191}{12})^{12}$

A = $1.20863\times780=942.73$dollars

Interest accured = $942.73-780=162.73$ dollars

Now difference in interest in both cases = $282.39-162.73=119.66$ dollars

Hence, Barney will save about $119.66.