Question

You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of 2.9 percent per year, compounded monthly. Increasing thereafter to 17.8 percent compounded monthly.

Assuming you transfer the $14,000 balance from your existing credit card and make no subsequent payments, how much interest will you owe at the end of the first year?

Answer 1

$1,516.22

Step-by-step explanation:

Amount of Loan after 1 year = Amount of Balance transfer * (1+(i1/12))^(n1*12) * (1+(i2/12))^(n2*12). i1 = 0.029, n1 = 0.5 years, i2 = 0.178 & n2 = 0.5 years

Amount of Loan after 1 year = $14,000*(1+(0.029/12))^(0.5*12) * (1+(0.178/12))^(0.5*12)

Amount of Loan after 1 year = $14,000*1.014587887*1.092366422

Amount of Loan after 1 year = $15516.22436

Amount of Loan after 1 year = $15,516.22

Interest owed = Amount after 1 year - Amount of balance transfer

Interest owed = $15,516.22 - $14,000

Interest owed = $1,516.22