Question

After how many months will Rita pay two hundred dollars in simple annual interest on a credit card that charges twelve percent on her four hundred dollars balance?

A. 2 months

B. twelve months

C. fifty months

D. sixty months

Answer 1

12% interest. The formula for finding how much interest is:

400 * (1 + .12)^x - 400 = ? x: the number of years

The question already provides interest so we just need to plug it in:

400 * (1.12)^x - 400 = 200

At this point, the easiest way is to check the answer choices. Those are in months so divide them by 12 to get the years: 60 mo = 5 years etc.

Example: replace x by 5 and see if the equation works.