Answer:
He will save $ 63.61 ( approx ).
Step-by-step explanation:
Since, the credit card balance formula,
[tex]A=P(1+r)^t[/tex]
Where,
P = Original balance
r = rate per period,
t = number of periods,
If P = $ 890,
Annual interest rate = 18.7% = 0.187 ⇒ monthly rate, r = [tex]\frac{0.187}{12}[/tex] ( ∵ 1 year = 12 months )
Number of years = 1 ⇒ months, t = 12,
Thus, the balance after year,
[tex]A_1=890(1+\frac{0.187}{12})^{12}\approx \$1071.46[/tex]
If Annual interest rate = 12.5% = 0.125 ⇒ monthly rate, r = [tex]\frac{0.125}{12}[/tex]
The balance would be,
[tex]A_2=890(1+\frac{0.125}{12})^{12}\approx \$1007.85[/tex]
Since,
[tex]A_1-A_2=1071.46-1007.85=\$ 63.61[/tex]
Hence, he will save $ 63.61 ( approx ).
