Rueben has a finance plan with the furniture store where the $4,770 he spent accrues finance charges at an annual interest rate of 9.3% compounded monthly for 4 years before he starts to make payments. What will be the balance on the account when he begins making payments?
A) $6,909.63
B) $6,909.72
C) $6,909.60
D) $6,909.69
E) $6,909.66

Question

Quizplus · Accepted Answer

We can use the formula for compound interest to find the balance on the account after 4 years:

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

where A is the ending balance, P is the principal amount (initial amount spent), r is the annual interest rate (as a decimal), n is the number of times the interest is compounded per year, and t is the number of years.

Plugging in our values, we get:

A = 4770(1 + 0.093/12)^(12*4) 
A = 6909.60

Therefore, the balance on the account when Rueben begins making payments is $6,909.60. The answer is C.

Rueben Has a Finance Plan with the Furniture Store Where