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You have to use this online financial calculator to figure this out:

https://arachnoid.com/finance/

 

1- You have to convert the interest rate from compounded daily to compounded monthly, because the payments are made monthly and the interest rate must match the monthly payments. So:

15.9% compounded daily =16% compounded monthly.

PV =$4,785.00, monthly payments =$350.00, payments per year(P/Y)= 12, compounding periods per year(C/Y) =12, FV of the loan =$5,851.86, number of monthly payment(N) =15.19 months.

Total cost of principal + interest =15.19 months x $350.00 =$5,317.84

 

2- Do exactly the same for the 2nd card:

14.2% compounded daily = 14.28% compounded monthly.

PV =$4,785.00, monthly payments =$350.00, payments per year(P/Y) = 12, compounding periods per year(C/Y) = 12, FV of the loan =$5,714.85, mumber of monthly payments(N)= 15.01 months.

Total cost of principal + interest =15.01 months x $350 =$5,253.45

 

3- Total cost on the 1st card =$5,317.84 - [2% x $4,785.00] =$5,222.14 Net cost on 1st card.

    Total cost on the 2nd card =$5,253.45 - $100 = $5,153.45 Net cost on 2nd card.

    $5,222.14 - $5,153.45 = $68.69 - difference in net cost between card 1 and card 2

Therefore, the second card is a bit cheaper, or $68.69 cheaper!.

 

Note: Compounding periods of 365 days per year on both cards = 12 compounding periods per year after both interest rates are converted to monthly compound. That is: 15.9% and 14.2% componded daily are EQUIVALENT to 16% and 14.28% compounded monthly.

Jan 12, 2018
 #1
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+1

In order to simplify this expression, we must create a common denominator. Otherwise, subtracting complicated fractions is not feasible. Currently, \(\frac{a^2+1}{a^2-1}-\frac{a-1}{a+1}\) does not have this, so we must create one. 

 

The denominator of the first term, \(a^2-1\) can be factored because it is a difference of two squares. Sometimes, factoring the denominator fully is helpful since it can make identifying the least common multiple all that more painless. In this case, \(a^2-1=(a+1)(a-1)\).

 

We now have \(\frac{a^2+1}{(a+1)(a-1)}-\frac{a-1}{a+1}\). Well, would you look at that! It is clear here that \((a+1)(a-1)\) is the least common multiple of the denominators since \(a+1\) is a factor of the product of binomials. Let's manipulate \(\frac{a-1}{a+1}\) so that we can create the desired common denominator.

 

\(\frac{a-1}{a+1}\) As aforementioned, let's convert this into a fraction with a common denominator.
\(\frac{a-1}{a+1}*\frac{a-1}{a-1}\) Of course, the actual value of the fraction remains unchanged since I am really multiplying the fraction by one. Now, let's combine.
\(\frac{(a-1)(a-1)}{(a+1)(a-1)}\)  
   

 

Ok, we have now changed the problem from \(\frac{a^2+1}{a^2-1}-\frac{a-1}{a+1}\) to \(\frac{a^2+1}{(a+1)(a-1)}-\frac{(a-1)(a-1)}{(a+1)(a-1)}\). This transformation is indeed a positive one because we can now combine the fractions. We have now overcome the first stumbling block. 

 

\(\frac{a^2+1}{(a+1)(a-1)}-\frac{(a-1)(a-1)}{(a+1)(a-1)}\) Combine the fractions now that the same denominator of both terms exist.
\(\frac{a^2+1-(a-1)(a-1)}{(a+1)(a-1)}\) Let's determine the product of the binomials. Since both binomials are identical, we can utilize the rule that \((x-y)^2=x^2-2xy+y^2\)
\(\frac{a^2+1-(a^2-2a+1)}{(a+1)(a-1)}\) Distribute the negative sign to all the terms it contains in parentheses.
\(\frac{a^2+1-a^2+2a-1}{(a+1)(a-1)}\) Look at that! In the numerator, the a2-term will cancel out and so will the constants!
\(\frac{2a}{(a+1)(a-1)}\) We can do the multiplication of the binomials in the denominator again. We already know what the product is.
\(\frac{2a}{a^2-1}\) Of course, let's not forget the restrictions for the value of a. 
\(\frac{2a}{a^2-1}, a\neq\pm1\) If a was equal to the restricted values, a division by zero would occur, which is forbidden.
Jan 12, 2018
Jan 11, 2018
 #4
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Jan 11, 2018

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