Question

After 4 years, approximately how much will marcia have saved in interest by consolidating the two balances? a. $1,890.24 b. $133.92 c. $543.84 d. $1,346.40

Answer 1

The amount that Marcia will have saved in interest by consolidating the two balances is: b.$133.92.

Amount saved in interest

First step

Calculating for credit card A monthly payment (12% APR) using financial calculator

=pmt(rate,nper,-pv,fv)

Where:

Rate=12%/12=1%

Nper =12 months×4 years=48

PV = $1,389.47

FV=0

Hence:

=pmt(1%,48,-1389.47,0)

=$ 36.59  

Second step

Monthly payments 16% APR=$39.38×48

Monthly payments 16% APR =$1890.24

Monthly payments  12% APR=$36.59×48

Monthly payment 12% APR=$1756.32

Third step

Amount saved in interest=$1890.24 -$1756.32

Amount saved in interest=$133.92

Therefore the correct option is B.

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