2 months ago, Blake used his credit card for a transaction of 400 dollars. The bank charges a rate of interest of 25\% percent per month compounded monthly. How much does Blake owe to the bank today?
Answers
Given :- 2 months ago, Blake used his credit card for a transaction of 400 dollars. The bank charges a rate of interest of 25% per month compounded monthly. How much does Blake owe to the bank today ?
Answer :-
since rate is compounded monthly and time is also 2 months .
so,
→ Amount = P[1 + (rate/100)]^time
→ A = 400[1 + (25/100)]²
→ A = 400[1 + (1/4)]²
→ A = 400(5/4)²
→ A = (400 * 25)/16
→ A = $625 (Ans.)
Hence, Blake owe $625 to the bank today .
[Note :- If rate was compounder per annum , we need to divide it by 12 in order to get monthly rate. ]
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