Question

Nashota pays $30 each month on a credit card that charges 1.4% interest monthly. She has a balance of $450. The balance at the beginning of the month is given by the following function that is defined recursively. Find the balance at the beginning of the fifth month

Answer 1

To answer, we project the current balance to future worth.
FV = ($450) x (1 + 0.014)^5
FV = $482.40

Also, we convert the monthly amount to future worth by the equation,
FV = M x ((1 + r)^n - 1) / r)
Substituting,
FV = ($30) x (1 + 0.014)^5 - 1)/0.014)
FV = $152.3
Subtracting the calculated values,
Balance = $482.40 - $152.3
Balance = $328.14