Question

Melanie has a balance of $1700 on a credit card with an apr of 24.2%, compounded monthly. about how much will she save in interest over the course of a year if she transfers her balance to a credit card with an apr of 10.8%, compounded monthly? (assume that melanie will make no payments or new purchases during the year and ignore any possible late payment fees.)

Answer 1

She will save about $267.27 ($2160.24 - $1892.97) in interest over the course of a year if she transfers her balance to a credit card with an apr of 10.8%, compounded monthly. This problem can be solved using the compounding interest formula which stated as A = P*(1+i)^n. A is the amount affected by the compounding interest, i is the interest rate, and n is the period of time. You must find the amount using the 24.2% and 10.8% compounding interest and find the difference between them.