Moses transferred a balance of $1950 to a new credit card at the beginning of the year. The card offered an introductory APR of
2.7% for the first 2 months and a standard APR of 23.4% thereafter. If the card compounds interest monthly, which of these expressions represents Moses's balance at the end of the year? (Assume that Moses will make no payments or new purchases during the year, and ignore any possible late payment fees.)
2 answers:
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Answer:
see below
Step-by-step explanation:
When you must do the same tedious calculation several times with different numbers, it is convenient to let a spreadsheet program do it for you. Here, the spreadsheet function PMT( ) computes the payment amount for the given interest rate, number of payments, and loan amount.
The loan amount is 90% of the purchase price.
The total interest over the life of the loan is the sum of the payments less the original loan amount.
The total monthly payment is the sum of the loan payment and the monthly escrow amount, which is 1/12 of the annual escrow amount.
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Here, we computed the total of payments using the unrounded "exact" value of each payment. We take this to be a better approximation of the total amount repaid, since the last payment always has an adjustment for any over- or under-payment due to rounding.
