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 $1,300 and intends to pay it in one year, what will she have to
Pay?
A)$1,316.25
B)$1,566.28
C)$1,509.26
D)$1,508.98
E)$1,464.87

Question

Quizplus · Accepted Answer

To solve this problem, we can use the formula for compound interest:

A = P(1 + r/n)^(nt)

Where:
A = the amount owed after one year
P = the principal amount (initial balance) = $1,300
r = annual interest rate = 15% = 0.15
n = number of times interest is compounded per year = 12 (monthly)
t = time in years = 1

Plugging in these values, we get:

A = 1300(1 + 0.15/12)^(12*1)
A = $1,508.98

Therefore, the senior in college will have to pay $1,508.98 at the end of one year. The correct answer is D.

A Bank Credit Card Charges Interest at the Rate of 15