SOLUTION: Edgar accumulated $7,000 in credit card debt. If the interest rate is 30% per year, and he does not make any payments for 2 years, how much will he owe (in dollars) on this debt in
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Question 1129288: Edgar accumulated $7,000 in credit card debt. If the interest rate is 30% per year, and he does not make any payments for 2 years, how much will he owe (in dollars) on this debt in 2 years by each method of compounding? (Simplify your answers completely. Round your answers to the nearest cent.)
(a)compound quarterly
$
(b)compound monthly
$
(c)compound continuously
$
Answer by stanbon(75887) (Show Source): You can put this solution on YOUR website!
Edgar accumulated $7,000 in credit card debt. If the interest rate is 30% per year, and he does not make any payments for 2 years, how much will he owe (in dollars) on this debt in 2 years by each method of compounding? (Simplify your answers completely. Round your answers to the nearest cent.)
(a)compound quarterly
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I(t) = P(1+(r/n))^(nt)-P
I(2) = 7000(1+(0.30/4))^(4*2) - 7000
I(2) = $5484.34
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(b)compound monthly (n = 12)
I(2) = 7000(1+0.3/12))^(12*2)-7000 = $5661.08
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(c)compound continuously
I(2) = 7000*e^(0.3*2) - 7000
I(1) = $5754.83
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Cheers,
Stan H.
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$
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