Suppose you owe $1000 on your credit card and that at the end of each month an additional 1.4708% of the amount you owe is added on the amount you owe (this is what would happen if your credit card charged an annual percentage rate of 17.6490%) Lets assume that you do not pay off any of this debit or the interest that is added to it. Lets also assume that you dont add on any more debt other that the interest charged.
How much will you owe after 6 months? after one year? after 2 years/
Calculate (1.014708)48 and notice that this number is ust a little larger than 2. Based o this calculation, what will happen to your debt every 4 years Explain?
Suppose you didnt pay off your debt for 40 years. Using part b determine approximatley how much you owe?
Its long but its an MCAS exam practaice question.