Question

Assume that you have a balance of $4000 on your Discover credit card and that you make no more charges. Assume that Discover charges 24% APR and that each month you make only the minimum payment of 3% of the balance.What will the balance be after 8 years? round

Answer 1

Given:

$\text{Monthly rate=}\frac{24}{12\times100}$$\text{Monthly rate=}0.02$

Each month amount increse by a factor 1.02

Each month balance decrease by a factor 0.97

$\text{Total factor= (1.02)(0.97)}$$\text{Total factor=}0.9894$

Balance after 8 years:

$=4000(0.9894)^{96}$$=\text{ \ 1438}.01$

The balance after 8 years is $1438.01