Question

Use the following compound interest formula to complete the problem. A = P (1 StartFraction r over n EndFraction) superscript n superscript t Sandra has two credit cards, P and Q. Card P has a balance of $726. 19 and an interest rate of 10. 19%, compounded semiannually. Card Q has a balance of $855. 20 and an interest rate of 8. 63%, compounded monthly. Assuming that Sandra makes no purchases and no payments with either card, after four years, which card’s balance will have increased by more, and how much greater will that increase be? a. Card Q’s balance increased by $7. 22 more than Card P’s balance. B. Card Q’s balance increased by $6. 69 more than Card P’s balance. C. Card P’s balance increased by $3. 43 more than Card Q’s balance. D. Card P’s balance increased by $0. 80 more than Card Q’s balance.

Answer 1

The total amount is equal to the sum of principal and interest. Option C is correct. The amount on Card P increased by $3.43 more than the sum on Card Q.

What is a credit card?

A credit card is a payment card offered to users to enable the cardholder to pay a merchant for goods and services based on the cardholder's incurred debt.

The given data in the problem is;

Time period = 4 years

Increase rate for card p= 10. 19%,

principal for card P= $726. 19

principal for card Q =  $855. 20

Increase rate for card Q= 8. 63%

The value obtained after the interest is commutative balance.

total cumulative balance in Card P = $1080.70

total cumulative balance in Card Q= $1,206.28.

Card P has a total cumulative balance of $1080.70 during the last four years, whereas Card Q has a total accumulated balance of $1,206.28.

When the principal is removed from the cumulative value, Card P would have earned more interest than Card Q based on the principal outlay.

Intreast for card P  = $1080.70- $726.19 = $354.51

Intreast for card Q= $1206-$854.92=$351.08

The interest over the four years would be $354.51 and $351.08, respectively,

Hence option C is correct. Card P’s balance increased by $3. 43 more than Card Q’s balance.

To learn more about the credit card refer to the link;

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