Question

Use the following compound interest formula to complete the problem.

Sandra has two credit cards, P and Q. Card P has a balance of $726.19 and an interest rate of 10.19%, compounded semiannually. Card Q has a balance of $855.20 and an interest rate of 8.63%, compounded monthly. Assuming that Sandra makes no purchases and no payments with either card, after four years, which card’s balance will have increased by more, and how much greater will that increase be?
a.
Card Q’s balance increased by $7.22 more than Card P’s balance.
b.
Card Q’s balance increased by $6.69 more than Card P’s balance.
c.
Card P’s balance increased by $3.43 more than Card Q’s balance.
d.
Card P’s balance increased by $0.80 more than Card Q’s balance.

Answer 1

Your answer is C. i rather give the letter its easier.

Explanation:

took test

Answer 2

Card P's balance increased by $3.43 more than Card Q's balance. The accumulated total on Card P over the 4 years is $1080.70 and the accumulated total of Card Q is $1,206.28. Based on the principal outlay however, Card P would have netted a higher interest over Card Q when the principal is subtracted from the accumulated value. (For eg. Card P accumulated value $1080.70 less Principal $726.19 equals $354.51).The interests over the 4 years period would be $354.51 and $351.08 respectively, hence Card P having an increase in balance of $3.43 over Card Q.