Peyton has a credit card with an annual rate of 24.7% compounded monthly. She used the credit card to purchase cleaning supplies in the amount of $189.56. She can pay up to $72 on the credit card each month. How much total interest will she pay?

$3.90

$7.47

$8.29

Question

Peyton has a credit card with an annual rate of 24.7% compounded monthly. She used the credit card to purchase cleaning supplies in the amount of $189.56. She can pay up to $72 on the credit card each month. How much total interest will she pay?

 $3.90

 $7.47

 $8.29

anonymous · Answer

(1)Assuming that she pays $72 in the first month, we have 189.56 - 72 = ??? left.
(2)You take ??? and multiply it by 1/12 of 24.7% because 24.7% is the annual rate and you need the monthly rate to calculate the interest  for the first month. 
(3)Then you add this interest you've just found back to ??? and that will be the amount that appears on the statement for the next month.

Then repeat the (1) (2) (3) process for the amount you see on the statement in the second month. Keep repeating until the balance reaches 0. Then you can go back and add up all the monthly interest you have calculated to arrive at the answer.