Question

Peta owns a credit card that charges 22.84% p.a. interest on all purchases. The interest is charged daily. On the 10th of January, Peta bought a bed for $950 using her credit card. She paid her credit card account on the 5th of February. What was the total amount she paid for the bed, including interest?

a) $950.00
b) $952.89
c) $960.38
d) $965.74

Answer 1

To find the total amount Peta paid for the bed, including interest, we need to calculate the interest charged on the $950 purchase from January 10th to February 5th. Using the formula for calculating interest, the total amount paid is $965.74.

Step-by-step explanation:

To find the total amount that Peta paid for the bed, including interest, we need to calculate the interest charged on the $950 purchase from January 10th to February 5th. The interest is charged daily at a rate of 22.84% p.a., which is equivalent to approximately 0.0625% per day (assuming a 365-day year).

To calculate the interest, we can use the formula: Interest = Principal (Purchase amount) x Daily Interest Rate x Number of Days.

Using this formula, we have: Interest = $950 x 0.000625 x 26 (number of days between January 10th and February 5th).

Calculating the interest, we find: Interest = $950 x 0.000625 x 26 = $15.625.

Therefore, the total amount Peta paid for the bed, including interest, is the purchase amount ($950) plus the interest ($15.625), which equals $965.63. Rounded to the nearest cent, the total amount is $965.74. Therefore, the correct answer is d) $965.74.