Question

A person is $1000 on the credit card that charges an interest rate of 2% per month complete the table showing the car to balance each month if you do not make any payments

Answer 1

Month Total Bill

1 1000

2 1,020

3 1,040.40

4 1,061.21

5 1,082.43

6 1,104.08

7 1,126.16

8 1,148.69

Explanation:

Use the formula for compound interest

`A = P(1+r)^t`

where A is the balance, P is the principal (credit card balance), r is the effective rate and t is the number of time periods

Here r = 2% computed monthly which is 2/100 = 0.02 in decimal and t = 1, 2,3,4,5,6,7,8 months

So 1 + r = 1+0.02 = 1.02

We can compute the monthly balance for each subsequent month by multiplying the previous month's balance by 1.02

All figures rounded to the nearest cent

Answer

Month Total Bill

1 1000

2 1,000 x 1.02 = 1,020

3 1,020 x 1.02 = 1,040.40

4 1,040.40 x 1.02 = 1,061.21

5 1,061.21 x 1.02 = 1,082.43

6 1,082.43 x 1.02 = 1,104.08

7 1,104.08 x 1.02 = 1,126.16

8 1,126.16 x 1.02 = 1,148.69