Question

Darlene has a balance of $3980 on a credit card with an APR of 22.8%. Paying off her balance in which of these lengths of time will result in her paying the least amount of interest?
A. 8 months
B. 6 months
C. 9 months
D. 5 months

Answer 1

Answer:

The correct answer is D. 5 months

Step-by-step explanation:

Balance = P = $3980

Rate (r) = 22.8% ,

n is no. of times interest is calculated in one year n = 1

$Interest=P\cdot (1+\frac{r}{n\times 100})^{n\times time}\\\\\textbf{time = t = 8 months = }\frac{8}{12}\text{ years}\\\\Interest=3980\cdot (1+\frac{22.8}{1\times 100})^{1\times \frac{8}{12}}\\\\Interest=3980\times 1.228^{\frac{8}{12}}\\\\\implies Interest=\ \thinspace 4564.03\\\\\textbf{time = t = 6 months = }\frac{6}{12}\text{ years}\\\\Interest=3980\cdot (1+\frac{22.8}{1\times 100})^{1\times \frac{6}{12}}\\\\Interest=3980\times 1.228^{\frac{6}{12}}\\\\\implies Interest=\ \thinspace 4410.44$

$\textbf{time = t = 9 months = }\frac{9}{12}\text{ years}\\\\Interest=3980\cdot (1+\frac{22.8}{1\times 100})^{1\times \frac{9}{12}}\\\\Interest=3980\times 1.228^{\frac{9}{12}}\\\\\implies Interest=\ \thinspace 4642.82\\\\\textbf{time = t = 5 months = }\frac{5}{12}\text{ years}\\\\Interest=3980\cdot (1+\frac{22.8}{1\times 100})^{1\times \frac{5}{12}}\\\\Interest=3980\times 1.228^{\frac{5}{12}}\\\\\implies Interest=\ \thinspace 4335.60$

Hence, the least amount of interest is paid in time length of 5 months

So, Correct Option is D. 5 months