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Thread: Compound

  1. #1
    Junior Member
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    Question Compound

    Walmart charges 1.25% / month on the unpaid balance of a charge account. Interest is compounded monthly. A customer charges $600 and does not pay her bill for 6 months. What is her bill at that
    time?
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  2. #2
    Grand Panjandrum
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    Quote Originally Posted by Nusc View Post
    Walmart charges 1.25% / month on the unpaid balance of a charge account. Interest is compounded monthly. A customer charges $600 and does not pay her bill for 6 months. What is her bill at that
    time?
    The basic growth of the debt is governed by:

    $\displaystyle X_n=(1+r)X_{n-1}$

    where $\displaystyle X_n$ is the amount owing after $\displaystyle n$ months (so $\displaystyle X_0=600$ dollars) and $\displaystyle r$ is the interest rate as a decimal fraction (so $\displaystyle 1.25\% = 0.0125$)

    So:

    $\displaystyle
    X_n=(1+r)^n X_0
    $

    All of which should be in your notes, so where exactly are you having problems.

    CB
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