You owe $1,568.00 on a credit card with a limit of $2,200.00 at an interest rate of 11.3% APR. You pay $300.00/month until it is
paid off. How much is the total interest you paid?
A.) $47.80
B.) $49.23
C.) $59.32
D.) $55.16
A.) $47.80
B.) $49.23
C.) $59.32
D.) $55.16
2 answers:
Answer:
A.) $47.80
Step-by-step explanation:
See attached the table done in EXCEL.
In the first column we have the month.
In the second column we have the unpaid balance. Notice we start with $1,568.00.
In the third column we have the interest. We calculate it by multiplying the unpaid balance (second column) by 0.0113/12, because 0.0113 is 11.3% in decimal form and we divide that annual rate by 12 to get the monthly rate.
In the fourth column we have the payment. It is either $300.00. Or if the unpaid balance plus interest is less than $300.00 then we just pay that unpaid balance plus interest like happened in the last month (sixth month) where only $115.79 was paid to leave the balance in $0.
We start the next row by calculating the new unpaid balance by adding the unpaid balance and interest of the previous month and subtracting the payment done in that month. For example: in the second row (2nd month) the unpaid balance is $1,568.00 + $14.77 - $300.00 = 1,282.77
Each row follow the very same reasoning. Then at the end to calculate the total interest you paid, we just have to add the third column values. Alternatively we can add all the payments (fourth column) which gets $1,615.80 and subtract the initial balance $1,568.00 so that we get the $47.80
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