Question

Michelle uses a credit card with a 23.2% APR compounded monthly to pay for car repairs totaling $790.59. She can pay $330 per month on the card. What will the total cost of this purchase be?

$974.01

$790.59

$818.07

$948.66

Answer 1

Its going to be 818.07

because first month interest is ~15 dollars
second month interest is ~ 9 dollars
final month interest will be about ~ 2

Answer 2

take the initial value multiple it by the interest rate divide and you have your interest
take the interest amount and divide it by 12 to get your monthly interest then add that to you initial value

Answer 3

from there subtract your 330 and repeat that process till the last month

Answer 4

So it would be 790.59(1+0.232)^12-330

Answer 5

close forgive me for not remembering the exact formula you need to use but you go like this

790.59*.232 = 183.41688 / 12 = 15.28474 + 790.59 = 805.87474 as your first month balance

then subtract the 330 and use your initial to start the numbers again

you don't worry about the exponent because you are just finding the interest for the single month. Your total balance changes each month and the interest charged will change with it.

Answer 6

you're actually close 790.59(1 + .232/12) ^1 - 330

Answer 7

So with that I got 475.87, what do you do after that?

Answer 8

take that number and put it into the formula again

475.87474(1+.232/12)^1 -330 = 155.074985

155.074985(1.232/12^1 = 158.0731013 is your last payment due

so add up 330 + 330 + 158.0731013 = 818.0731013

Answer 9

Ooooooh okay, thank you!

Answer 10

Would I use that same equation for this problem too??
Ken owes $6,451 on a credit card with an 18.6% interest rate compounded monthly. What is the monthly payment he should make in order to pay off this debt in 12 months, assuming he does not charge any more purchases with the card?

$112.24

$593.27

$1,377.78

$537.58

Answer 11

its a little more difficult this time. I wish I remembered the exact equation because it would make your life so much easier.

I can tell you the answer will be either B or D.

Give me one second and I will try and type this all out.

Answer 12

Okay, thank you though! I'm thinking it's B

Answer 13

its definitely B because D is what you would pay monthly with no interest:)

Answer 14

I need to leave work and havent been able to figure it out, if you havent gotten an answer to this later tonight I will try and give it another go. B makes sense but I can't get the number to match up for some reason.

Answer 15

Okay, thank you. I'll tell you if the answer is correct or not when I get it