A bank credit card charges interest at the rate of 15% per year, compounded monthly.If a senior in college charges her last tuition bill of $1,100 and intends to pay it in one year, what will she have to
Pay?
A)$1,277.07
B)$1,325.31
C)$1,276.83
D)$1,113.75
E)$1,239.51

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we can find the amount she will owe after one year:
A = P(1 + r/n)^(nt)
where:
P = $1,100 (the principal)
r = 0.15 (the annual interest rate, as a decimal)
n = 12 (the number of times per year that interest is compounded)
t = 1 (the time, in years)
Plugging in these values, we get:
A = 1100(1 + 0.15/12)^(12*1)
A = $1,276.83
Therefore, the senior in college will have to pay $1,276.83 in one year. The closest answer choice to this value is C, $1,276.83.

A Bank Credit Card Charges Interest at the Rate of 15