Question

Dempsey transferred a balance of $5600 to a new credit card at the beginning of the year. The card offered an introductory APR of 6.6% for the first 4 months and a standard APR of 24.8% thereafter. If the card compounds interest monthly, what will Dempsey's balance be at the end of the year? (Assume that Dempsey will make no payments or new purchases during the year, and ignore any possible late payment fees.)

A. $6741.98
B. $6595.68
C. $5724.22
D. $7158.06

Answer 1

the answer is 6741.98

Answer 2

The correct option is A. $6741.98

Explanation:

Principal value = $5600

Rate of interest for 4 months = 6.6%

n = 12

Time = 4 months

`\text{Compound Interest = }Principal* (1+(Rate)/(100* n))^(n* Time)\\\\\implies \text{Compound Interest = }5600* (1+(6.6)/(100* 12))^{12* (4)/(12)}\\\\\implies \text{Compound Interest = }5600* (1+(6.6)/(100* 12))^(4)\\\\\implies \text{Compound Interest = }\$5724.22`

Now, Principal = $5724.22

Time = 8 months

Rate of interest = 24.8

`\text{Compound Interest = }Principal* (1+(Rate)/(100* n))^(n* Time)\\\\\implies \text{Compound Interest = }5724.22* (1+(24.8)/(100* 12))^{12* (8)/(12)}\\\\\implies \text{Compound Interest = }5724.22* (1+(24.8)/(100* 12))^(8)\\\\\implies \text{Compound Interest = }\$6741.98`

Hence, The correct option is A. $6741.98