Question

Suppose hat on January 1 you have a balance of $5900 on a credit card whose APRIs 15%, which you want o pay ofin 1 year. Assume that you make no additional charges the card after 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 s Do not round until the final answer. Then round to the nearest cent as needed.) b. The total paid since January 1 is $ Use the answer from part (a) to find this answer. Round to the nearest cent as needed.) C. The percentage of the total paid that is interest is L%. (Use the answer from part (b) to find this answer. Round to one decimal place as needed)

Answer 1

In this case,

P = $5900

r = 15% = 0.15

n = 12 [Since compounded monthly]

t = 1 year

a) Monthly Payment = P * (r/ n) / [ 1 - (1 + r/n)^-nt]

= 5900 * (0.15 / 12) / [ 1 - (1 + 0.15/12)^-12*1]

= 5900 * (0.15 / 12) / [ 1 - (1 + 0.15/12)^-12]

= $532.52

Therefore,

Monthly Payment = $532.52

b) Total Paid since January 1

= Month Payment * n * t

= $532.52 * 12 * 1

= $6390.24

c) Interest paid

= Total Amount Paid - P

= $6390.24 - 5900

= $ 490.24

% of total paid is interest

= (490.24 / 6390.24) * 100 %

= 7.7 %