Question

Assume that you have a balance of $4000 on your Discover credit card and that you make no more charges. Assume that Discover charges 24% APR and that each month you make only the minimum payment of 3% of the balance.What will the balance be after 8 years? round

Answer 1

Given:

`\text{Monthly rate=}(24)/(12*100)`
`\text{Monthly rate=}0.02`

Each month amount increse by a factor 1.02

Each month balance decrease by a factor 0.97

`\text{Total factor= (1.02)(0.97)}`
`\text{Total factor=}0.9894`

Balance after 8 years:

`=4000(0.9894)^(96)`
`=\text{ \$1438}.01`

The balance after 8 years is $1438.01