Question

You owe $300 on your credit card. For every month that you fail to make a payment, your balance increases by 1%. Find a formula for the balance B owed after t months with no payment.

Answer 1

`B(t) = 300(1.01)^(t)`

Explanation:

The balance owed after t months can be given by an exponential function in the following format:

`B(t) = B(0)(1+r)^(t)`

In which B(0) is the initial balance owed and r is the growth rate, as a decimal.

You owe $300 on your credit card. For every month that you fail to make a payment, your balance increases by 1%.

This means, respectively, that
`B(0) = 300, r = 0.01`

So

`B(t) = 300(1+0.01)^(t)`

`B(t) = 300(1.01)^(t)`