Question

4.D.29 Suppose that on January 1 you have a balance of $6000 on a credit card whose APR is 17%, which you want to pay off in 1 year. Assume that you make no additional charges to the card ather January 1 a. Calculate your monthly payments. b. When the card is paid off, how much will you have paid since January 1? c. What percentage of your total payment from part(b) is interest? a. The monthly payment is $ (Do not round until the final answer. Then round to the nearest cent as needed.)

Answer 1

Amount of loan $6,000 Interest rate 17% * 1/12 = 1.4166667% Per month Term = 1 Year * 12 = 12 Months a) Monthly payment = Amount of loan *1/[1-(1+1)^-n] = $6,000 * 1.41666667%/[1-(1+1.4166667%)^-12 ] = $85 / 0.15528164 = $547.2285125 = $547.23 (Rounded) b) Total amount of payment for loan = Monthly payment * Term = $547.23* 12 Months = $6,566.76 c) Amount of interest = Total amount paying - Amount of loan $6,566.76 - $6,000 = $566.76 Percentage of interest on total payment = Amount of interest / Total amount paying = $566.76 / $6,566.76 = 0.086307403 = 8.6307403 % = 8.63%