Question

Many credit card companies charge a compound interest rate of 1.8% per month on a credit card balance. Nelson owes $850 on a credit card. If he makes no purchases or payments, he will go deeper and deeper into debt.

Which of the following sequences describes his increasing monthly balance?
• A. 850.00, 1003.00, 1183.54, 1396.58, 1647.96,
• В. 850.00, 1003.00, 1156.00, 1309.00, 1462.00,
• c. 850.00, 865.30, 880.88, 896.73, 912.87,
• D. 850.00, 850.18, 850.36, 850.54, 850.72,
• E. 850.00, 865.30, 880.60,
895.90, 911.20,

Answer 1

Answer: • D. 850.00, 850.18, 850.36, 850.54, 850.72,

Step-by-step explanation:

The correct sequence describing Nelson's increasing monthly balance is D. 850.00, 850.18, 850.36, 850.54, 850.72.

This is because the credit card company charges a compound interest of 1.8% per month on the outstanding balance. In this case, Nelson's initial outstanding balance is $850.

To calculate the monthly balances, the interest is added to the previous month's balance. Hence, after one month, the balance will be:

$850 + (1.8% of $850) = $850 + $15.30 = $850.18

Similarly, the balance after two months will be:

$850.18 + (1.8% of $850.18) = $850.18 + $15.30 = $850.36

And so on for the following months. Therefore, the correct sequence describing Nelson's increasing monthly balance is option D.