What will be the amount owed at the end of one year if a borrower charges $100 on his/her credit card and doesn't make any payments during the year (assume the interest rate is 1.5% per month)?
What will be an ideal response?
$119.56. While it is tempting to multiply 1.5 times 12, obtaining 18% and the multiplying this by $100 to determine the interest charge, it would be incorrect since we would be ignoring compounding. The correct answer can be determined by using the following: FV = PV(1 + im)12. This will be FV = $100(1.015)12 or $119.56.
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The major disadvantage of commodity money is that
A) anybody can issue it and walk away. B) its value fluctuates with the scarcity of the commodity. C) it is subject to dollarization. D) the central bank cannot be prevented from issuing too much of it.
The basic idea behind the multiplier is that an increase in
A. GDP brings about an additional, larger increase in GDP. B. consumer spending causes a larger increase in investment spending. C. government spending causes a larger increase in tax revenues. D. spending will cause an even larger increase in equilibrium GDP.