Middle School

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Many credit card companies charge a compound interest rate of 1.8% per month on a credit card balance. Nelson owes $450 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?

Many credit card companies charge a compound interest rate of 1 8 per month on a credit card balance Nelson owes 450 on a credit

Answer :

Answer:

The series of nelsons debt balance is 450, 466.34, 474.74, 483.28 ……. Option D is correct.

Solution:

Given, Many credit card companies charge a compound interest rate of 1.8% per month on a credit card balance.

Means each month the rate increases exponentially.

Nelson owes $450 on a credit card and makes no purchases or payments, he will get into debt in the following way:

[tex]450 \times(1.018)^{t} \text { Here t represents the time. }[/tex]

Because we know that, compound interest [tex]=\text { amount } \times\left(1+\frac{\text { rate }}{100}\right)^{\text {time }}[/tex]

$450 was initial amount.

[tex]\begin{array}{l}{450 \times(1.018)^{1}=\$ 458.10 \text { is for the } 1 \mathrm{st} \text { month }} \\ {450 \times(1.018)^{2}=\$ 466.34 \text { is for the } 2 \text { nd month. }} \\ {450 \times(1.018)^{3}=\$ 474.74 \text { is for the } 3 \mathrm{rd} \text { month. }} \\ {450 \times(1.018)^{4}=\$ 483.28 \text { is for the fourth month and so on. }}\end{array}[/tex]

Hence, the series of nelsons debt balance is 450, 466.34, 474.74, 483.28 …….

Thus option D is correct

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