A bank credit card charges interest at the rate of 16% per year, compounded monthly.If a senior in college charges her last tuition bill of $1,700 and intends to pay it in one year, what will she have to
Pay?
A)$2,101.29
B)$1,722.67
C)$1,915.60
D)$1,993.38
E)$1,992.86

Question

Quizplus · Accepted Answer

To calculate the amount she will have to pay in one year, we use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($1,700), r is the annual interest rate (16% or 0.16), n is the number of times that interest is compounded per year (12, since it's compounded monthly), and t is the time the money is invested or borrowed for, in years (1 year). Plugging in the values, we get A = 1700(1 + 0.16/12)^(12*1) = $1,992.86.

A Bank Credit Card Charges Interest at the Rate of 16