Question

Larry accumulated $3,000 in credit card debt. If the interest rate is 10% per year and he does not make any payments for 2 years, how much will he owe on this debt in 2 years for quarterly compounding? Round your answer to two decimal places.

Answer 1

The amount will be "$3655.21".

Explanation:

The given values are:

Principle,

P = $3000

Interest rate,

r = 10% i.e., 0.1

Number of times interest,

n = 4

Time,

t = 2 years

As we know,

⇒
`A=P[1+(r)/(n) ]^(tn)`

On putting the values in the above formula, we get

⇒
`=3000[1+(0.1)/(4) ]^(2* 4)`

⇒
`=3000[1+0.025]^8`

⇒
`=3000* 1.2184`

⇒
`=3655.21` ($)