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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?

Solution

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?

Solution

Principal : 4500.29

Solution steps

Translate the problem into an equation:

7000 = P (1 + \frac{0.15}{4})^{4 \cdot 3}

Solve for

P, 7000 = P (1 + \frac{0.15}{4})^{4 \cdot 3} : P = 4500.29

Principal : 4500.29

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