Question

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.

Answer 1

Answer:

Allison will owe $10,888.50 in 3 years

Step-by-step explanation:

FV=PV(1+r/n)^nt

Where,

PV=$7000

r=15%=0.15

n=quarterly=4

t=3 years

FV=PV(1+r/n)^nt

=7000(1+0.15/4)^4*3

=7000(1+0.0375)^12

=7000(1.0375)^12

=7000(1.5555)

=10,888.50

To 2 decimal places=$10,888.50

Allison will owe $10,888.50 in 3 years