You receive a credit card application from Shady Banks Savings and Loan offering
ID: 2759800 • Letter: Y
Question
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 16.5 percent compounded monthly. Assume you transfer the $5,500 balance from your existing credit card and make no subsequent payments.
How much interest will you owe at the end of the first year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of .5 percent per year, compounded monthly for the first six months, increasing thereafter to 16.5 percent compounded monthly. Assume you transfer the $5,500 balance from your existing credit card and make no subsequent payments.
How much interest will you owe at the end of the first year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Answer
Figures in $
Month
Opening balance
Monthly interest rate
Interest
Closing balance
A
B
C
A*B
A+C
1
5500
0.005/12
0.0004167
2.29
5502.29
2
5502.29
0.005/12
0.0004167
2.29
5504.58
3
5504.58
0.005/12
0.0004167
2.29
5506.88
4
5506.88
0.005/12
0.0004167
2.29
5509.17
5
5509.17
0.005/12
0.0004167
2.30
5511.47
6
5511.47
0.005/12
0.0004167
2.30
5513.76
7
5513.76
0.165/12
0.01375
75.81
5589.58
8
5589.58
0.165/12
0.01375
76.86
5666.44
9
5666.44
0.165/12
0.01375
77.91
5744.35
10
5744.35
0.165/12
0.01375
78.98
5823.33
11
5823.33
0.165/12
0.01375
80.07
5903.40
12
5903.40
0.165/12
0.01375
81.17
5984.58
So Closing balance (A)
5984.58
Opening balance (B)
5500.00
Interest owed at the end of year (A - B)
484.58
Answer : You will owe interest of $ 484.58 at the end of the first year
Figures in $
Month
Opening balance
Monthly interest rate
Interest
Closing balance
A
B
C
A*B
A+C
1
5500
0.005/12
0.0004167
2.29
5502.29
2
5502.29
0.005/12
0.0004167
2.29
5504.58
3
5504.58
0.005/12
0.0004167
2.29
5506.88
4
5506.88
0.005/12
0.0004167
2.29
5509.17
5
5509.17
0.005/12
0.0004167
2.30
5511.47
6
5511.47
0.005/12
0.0004167
2.30
5513.76
7
5513.76
0.165/12
0.01375
75.81
5589.58
8
5589.58
0.165/12
0.01375
76.86
5666.44
9
5666.44
0.165/12
0.01375
77.91
5744.35
10
5744.35
0.165/12
0.01375
78.98
5823.33
11
5823.33
0.165/12
0.01375
80.07
5903.40
12
5903.40
0.165/12
0.01375
81.17
5984.58
So Closing balance (A)
5984.58
Opening balance (B)
5500.00
Interest owed at the end of year (A - B)
484.58
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