Allison accumulated $7,000 in credit card debt. If the interest rate is 15% per year and she does not make any payments for 3 years, how much will she owe on this debt in 3 years for quarterly compounding? Round your answer to two decimal places.
Mathematics · High School · Mon Jan 18 2021
Answered on
Given:
Principal amount ( P ) = $7,000
Rate ( r ) = 15% or 0.15
Term ( t ) = 3
Compounded quarterly ( n ) = 4
Formula for Compound interest.
A = P( 1 + r/n)^nt
A = Future value
Solution:
Substitute the given values of P, r, t and n to the formula for compound interest.
A = $7000 ( 1 + 0.15/4)^(4)(3)
A = $7000 ( 1.0375)^12
A = $7000 ( 1.55545433137)
A = $10,888.18
Final answer:
A = $10,888.18