Question

Wilson has a balance of $890 on a credit card with an apr of 18.7%, compounded monthly. about how much will he save in interest over the course of a year if he transfers his balance to a credit card with an apr of 12.5%, compounded monthly? (assume that wilson will make no payments or new purchases during the year, and ignore any possible late-payment fees.)

a.$117.85
b.$181.46
c.$299.31
d.$63.61

Answer 1

890×(1+0.187÷12)^(12)−890×(1+0.125÷12)^(12)=63.61....answer

Answer 2

Option d.$63.61

Explanation:

We will find the compound interests in both scenarios and then subtract them to find the difference.

Case 1:

p = 890

r = 18.7% or 0.187

n = 12

t = 1

Compound interest formula is :

`A=p(1+(r)/(n))^(nt)`

Putting the above values in formula we get,

`A=890(1+(0.187)/(12))^(12)`

= $ 1071.38

Case 2:

p = 890

r = 12.5% or 0.125

n = 12

t = 1

Putting the above values in formula we get,

`A=890(1+(0.125)/(12))^(12)`

= $1007.83

Now, the difference between both values is =
`1071.38-1007.83`

=$63.55 this is closest to option D.

Therefore, option D is the answer.