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? ____________
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.
1. (1pt) what is the formula for compound interest? _________________________
2. (1pt) How many times are you compounding the interest rate if you compound:
a. semi-annually__________________________________
b. monthly ________________________________________
c. annually ________________________________________
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. ________________________________________________________________________________________________________________
1. The formula for compound interest is: A = P(1 + r/n)^(nt)
2. The number of times interest is compounded is:
a. semi-annually: 2 times a year
b. monthly: 12 times a year
c. annually: 1 time a year
3. For Credit Card A:
A = 605.99(1 + 0.18/2)^(2t)
4. For Credit Card B:
A = 605.99(1 + 0.19/12)^(12t)
5. For Credit Card C:
A = 605.99(1 + 0.20)^(t)