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Question

(This is not a test its homework)
I HAVE SOME WHAT I UNDERSTAND DONE.
Noah has just graduated high school and has some credit card offers! The first credit card (Credit Card A) charges 18% compounded semi-annually. The second credit card (Credit Card B) charges 19% compounded monthly. The third credit card (Credit Card C) charges 20% compounded annually.

Which credit card do you assume will be the best deal? _____Credit card B_______

Noah isn’t sure which credit card is the best deal, so he wants to do some comparison. You’re going to help him out using the skills you learned in the Exponents Unit to create some equations and graphs to determine the best deal. Answer the following questions to get started. Check out your textbook and recent lessons for help.

(1pt) What is the formula for compound interest? A=P(1+I r/n)^nt A is the ending amount P is principle. R is the interest. N is the number of compounding a year, and T is the total number of years.
1. (1pt) How many times are you compounding the interest rate if you compound:
a. Semi-annually Twice a year.
b. Monthly Once a month
c. Annually. Once a year.

Let’s suppose he is going to buy a smartphone for \$605.99 and put the entire balance on the credit card. 3. (1pt) Create a simplified equation representing what credit card A would charge.

________________________________________________________________________________________________________________
4. (1pt) Create a simplified equation representing what credit card B would charge. ________________________________________________________________________________________________________________
5. (1pt) Create a simplified equation representing what credit card C would charge. ________________________________________________________________________________________________________________

in progress 0
2 weeks 2021-11-21T23:26:30+00:00 2 Answers 0

18% compounded monthly

vs

charges 18% compounded semi-annually.

#1 is worse than #2 because…

Since the nominal rates are the same, the card with the more frequent compounding so it would have the higher effective rat.

Step-by-step explanation:

2. Step-by-step explanation:

18% compounded monthly

vs

charges 18% compounded semi-annually.

#1 is worse than #2 because…

Since the nominal rates are the same, the card with the more frequent compounding so it would have the higher effective rat.

Let’s compare them!:

(1 + .18/12)^12 = 1.19562 —> effective rate is 19.562 per annum

(1+.18/2)² = 1.1881

1.1881 has the effective rate of 18.88% per annum

(1 + /17/4)^4 = 1.18114.. –> effective rate is 18.114% per annum

18% monthly is .18 over 12 each month = 0.015/month

so every month multiply by 1.015

total cost = \$607.99 * 1.01^number of months

18% semi annual = .18/2 every six months = .09 /half year

so every half year (6 months) multiply by 1.09

total cost = \$607.99 * 1.09^ (number of months/6)

17% quarterly = .17/4 every 3 months = .0425 /quarter year

so every quarter year (3 months) multiply by 1.0425

total cost = \$607.99 * 1.025^(number of months/3)

HOPE THIS HELPS YOU HAVE A GREAT GREAT GREAT FANTASTIC FRIDAY!