Question

Timothy Carter went out to eat with his girlfriend at a fancy restaurant. When he tried to pay the bill with his MasterCard credit card, he was told that the restaurant accepted only cash or American Express. His waiter suggested that he use the ATM across the street to withdraw cash using his credit card. Tim did as suggested and didn't pay attention to any fees until he received his credit card statement one month later. He was shocked to see the total fees (3% cash advance), and his APR was increased to 21%. Given the cost of the meal ($125) plus the associated fees, how much did his meal cost him?
a. $3.75
b.$125
c. $130.94
d. $2.19
e. $151.25

Answer 1

Answer:

Ans. the cost of the meal was $130.4

Explanation:

Hi, ok, the credit card is charging a 21% APR this means that the cost is 0.21/12 = 0.0175 monthly and the cash advance is 3%, so the associated fees to this $125 purchase are:

Interest fee

$125*0.0175= $2.19

Cash Advance fee

$125*0.03= $3.75

And the meal was $125, so the total cost of the meal was:

$125 + $2.19 + $3.75 = $130.94

Best of luck.