Question

Peter accumulated $7,500 in credit card debt. If the interest rate is 3.5% per year and he does not make any payments for 10 years, how much will he owe on this debt in 10 years by compounding continuously

Answer 1

A= $10,643.01

Explanation:

if you are rounded to the nearest cent

Identify the values of each variable in the formula. Remember to express the percent as a decimal.

A=?

P= $7,500

r= 0.035

t= 10 years

For compounding continuously, use the formula A=Pert.

Substitute the values in the formula and compute the amount to find

A= 7,500e
`x^0.035.10`
`x^(0.035.10)`

A= $10,643.01

Answer 2

$10579.49

Explanation:

The formula for amount gotten after a period of time (in years) on a principal which is compounded continuously is given as:

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

where P = principal (amount borrowed)

r = interest rate

t = number of years

Peter accumulated $7,500 in credit card debt with interest rate as 3.5% per year and he does not make any payments for 10 years.

Therefore, his debt is:

`A = 7500(1 + (3.5)/(100))^(10)\\ \\A = 7500 (1 + 0.035)^(10)\\\\A = 7500(1.035)^(10)\\`

A = $10579.49

He will owe $10579.49 after 10 years