Question

A bank is offering you an introductory credit card promotion. Your interest for the first year is 8%. But, at the beginning of the 2nd year your interest rate will go up to 23%. If you have an $1,800 balance on your card throughout both years, what will be the difference in the monthly interest owed during year 1 and year 2?

Answer 1

Answer:

$\ 22.5$

Step-by-step explanation:

GIVEN: A bank is offering you an introductory credit card promotion. Your interest for the first year is $8\%$. But, at the beginning of the $2$nd year your interest rate will go up to $23\%$. If you have an $\ 1,800$ balance on your card throughout both years.

TO FIND: difference in the monthly interest owed during year $1$ and year $2$.

SOLUTION:

rate of interest for first year $=8\%$

total amount on card $=\ 1800$

interest earned in first year $=\frac{\text{Principal}\times\text{rate}\times\text{time}}{100}$

                                             $=\frac{1800\times8\times1}{100}$

                                             $=\ 144$

monthly interest owed $=\frac{\ 144}{12}=\ 12$

rate of interest for first year $=23\%$

total amount on card $=\ 1800$

interest earned in first year $=\frac{\text{Principal}\times\text{rate}\times\text{time}}{100}$

                                             $=\frac{1800\times23\times1}{100}$

                                             $=\ 414$

monthly interest owed $=\frac{\ 414}{12}=\ 34.5$

Difference in monthly interest owed during year $1$ and year $2$ $=34.5-12=\ 22.5$