Sam is getting ready for a big date when he realizes that he has no money. His roommate, Bill, also has no money, but he has a credit card. Knowing that nobody will let Sam use Bill’s credit card, Sam asks Bill to pull out a cash advance for $120.00. Bill agrees under the condition that Sam is responsible for all interest that accrues on the cash advance which is a 30% interest rate, compounded monthly. 5 full years go by before the $120 cash advance is repaid. How much should Bill ask Sam to pay in interest for the cash advance?
a.
$3.88
b.
$112.80
c.
$120.00
d.
$232.80

Question

Sam is getting ready for a big date when he realizes that he has no money.  His roommate, Bill, also has no money, but he has a credit card.  Knowing that nobody will let Sam use Bill’s credit card, Sam asks Bill to pull out a cash advance for $120.00.  Bill agrees under the condition that Sam is responsible for all interest that accrues on the cash advance which is a 30% interest rate, compounded monthly. 5 full years go by before the $120 cash advance is repaid.  How much should Bill ask Sam to pay in interest for the cash advance? 
a.
$3.88
b.
$112.80
c.
$120.00
d.
$232.80