Question

If you charge $2,000 on a credit card today, how much will the

balance be in seven years (assuming no additional fees) if the
credit card has 14.99% APR that is compounded monthly?
A = P(1 + )

Answer 1

$5,674.30

Explanation:

Use the Compound Amount formula:

A = P(1 + r/n)^(n*t), where r = APR as a decimal fraction = 0.1499

and n = 12 (compounded monthly).

Then A = $2,000(1 + 0.1499/12) )^(7*12)

= $2,000(1 + 0.0125)^84

= $2,000(1.0125)^84 = $2,000(2.837) = $5,674.30