Question

Brandon has two credit cards and would like to consolidate the two balances into one balance on the card with the lower interest rate. the table below shows the information about the two credit cards brandon currently uses. card a card b amount $1,463.82 $1,157.98 apr 13% 17% monthly payment $24.60 $22.14 after 8 years, how much will brandon have saved in interest by consolidating the two balances? a. $581.76 b. $194.40 c. $256.32 d. $325.44 please select the best answer from the choices provided. a b c d

Answer 1

The amount which Brandon have saved in interest by consolidating the two balances on the card with the lower interest rate is $256.12.

What is monthly payment?

Monthly payment is the payment which has to paid against the loan amount or the borrowed money calculated with interest rate.

It can be calculated with the following formula.

$M=P\left (\dfrac{r}{1-(1+r)^{-nt}}\right)$

Here, (P) is the principal amount, (r) is the interest rate and (t) is time.

Brandon has two credit cards and would like to consolidate the two balances into one balance on the card with the lower interest rate.

The table below shows the information about the two credit cards Brandon currently uses.    

• Cards                Amount              APR             Monthly Payment
• Card a               $1,463.82              13%                 $24.60
• Card b               $1,157.98               17%                 $22.14

               

Interest rate for the card a is,

$r=\dfrac{13}{12\times100}=0.01083$

The time period is 8 years and there are 12 months in one year. Thus, the monthly payment of card A will be,

$M=1157.98\left (\dfrac{0.01083}{1-(1+0.01083)^{-12(8)}}\right)\\M=19.47$

In the 8 years, there is total 96 monthly payments. Thus, the total payment by card A is,

$P_a=19.47\times96=1869.12$

For the card B the monthly payment is $22.14. Thus the total payment by card B is,

$P_b=22.14\times96=2125.44$

The difference in the payment is,

$d=2125.44-1869.12\\d=256.12$

Hence, the amount which Brandon have saved in interest by consolidating the two balances on the card with the lower interest rate is $256.12.

Learn more about the monthly payment here;

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