Question

NEED HELP Please!
Amelia uses her credit card to buy some clothes for $678.34. She can pay off up to $235 per month. The card has an annual rate of 21.7% compounded monthly. How much total interest will she pay?

$11.93

$12.27

$24.65

$29.72

Answer 1

Month 1:

Calculate Balance (by adding interest to existing balance): 678.34*(1 + 0.217/12) = 690.606648333333 = 690.61
Make payment: 690.61 - 235 = 455.61
Old Balance: 690.61
New Balance: 455.61

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Month 2:

Calculate Balance (by adding interest to existing balance): 455.61*(1 + 0.217/12) = 463.8489475 = 463.85
Make payment: 463.85 - 235 = 228.85
Old Balance: 463.85
New Balance: 228.85

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Month 3:

Calculate Balance (by adding interest to existing balance): 228.85*(1 + 0.217/12) = 232.988370833333 = 232.99
Make payment: 232.99 - 232.99 = 0
Old Balance: 232.99
New Balance: 0

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Payments Made: 235, 235, 232.99
Number of Payments Made: 3


Total Cost: 235 + 235 + 232.99 = 702.99
Total Cost: $702.99


Total Interest: 702.99 - 678.34 = 24.65
Total Interest: $24.65

Answer 2

Thanks! I was confused on the equation i needed to use. This helped a lot!

Answer 3

It's not really an equation you use. It's more of the thought process you go through to get the answer