Question

Use the following compound interest formula to complete the problem. A = P (1 StartFraction r over n EndFraction) superscript n superscript t Currently you have two credit cards, H and I. Card H has a balance of $1,186. 44 and an interest rate of 14. 74%, compounded annually. Card I has a balance of $1,522. 16 and an interest rate of 12. 05%, compounded monthly. Assuming that you make no purchases and no payments with either card, after three years, which card’s balance will have increased by more, and how much greater will that increase be? a. Card I’s balance increased by $53. 16 more than Card H’s balance. B. Card I’s balance increased by $13. 45 more than Card H’s balance. C. Card H’s balance increased by $35. 61 more than Card I’s balance. D. Card H’s balance increased by $49. 06 more than Card I’s balance.

Answer 1

Credit cards are the card which is given by banks to the customers for withdrawing some amount beyond the account balance. The card I's is increased by $1579.3 than card H.

What is a credit card?

A credit card refers to a payment mechanism that helps both consumer and commercial business proceedings, including purchases and cash advances.

Computation of credit card's balance:

Amount of Card H after 3 years:

Given,

Principal(P) = $1,186.44

Interest Rate(r) = 14.74%

Number of time period(n) = 3 years.

Applying the above values in the formula given in the question:

$\text{A} = \text{P}(1+ \dfrac{r}{n} )^n^t\\\\\\\text{A} =\ 1,186.44(1+ \dfrac{14.74\%}{3} )^3\\\\\\\text{A}= \ 1792.2$

Amount of Card I after 3 years:

Principal(P) = $1,522

Interest Rate(r) = 12.05%

A number of the time periods (n):

$12\text{Months}\times3\text{Years} = 36 \text{Months}$

Again, apply the above values in the formula given in the question:

$\text{A} = \text{P}(1+ \dfrac{r}{n} )^n^t\\\\\\\text{A} =\ 1,522.16(1+ \dfrac{12.05\%}{12} )^3^6\\\\\\\text{A}= \ 3,371.58$

Now we take the difference between both the credit cards, we have:

$\text{Amount of Credit Card I}-\text{Amount of Credit Card H}\\\\=\43,371.58-\ 1,792.2\\\\=\ 1,579.38$

Therefore, card H's balance is decreased by $1579.3 than a card I.

Learn more about credit cards, refer to:

brainly.com/question/14716152