Question

milton opens a store credit card when he purchases appliances for his kitchen. the interest rate is 17.45%. he charges $3,740 to the card, and can pay $1,350 per month. What will the total cost of his purchase be?

Answer 1

Answer-

The total cost of his purchase will be $3,846.34

Solution-

Here, the annual interest rate is 17.45%.

So monthly interest rate will be,

$=\frac{17.45}{12} =1.454\%=0.01454$

With a purchase of $3,740, the amount will be after one month,

$=3740(1+0.01454)^1=3740(1.01454)=3794.38$

Then she makes a payment of $1350, so the balance at the end of month 1 is

$=3794.38-1350=2444.37$

Now she has to pay with $2444.37 as principal amount, the amount will be after one month,

$=2444.37(1+0.01454)^1=2444.37(1.01454)=2479.91$

Then she again makes a payment of $1350, so the balance at the end of month 2 is

$=2479.91-1350=1129.91$  

Final month, she has to pay with $1129.91 as principal amount, the amount will be,

$=1129.91(1+0.01454)^1=1129.91(1.01454)=1146.34$

So the total cost, including interest, would be the sum of the three payments,

$=1350+1350+1146.34=3,846.34$