I need help with a math problem. If someone finances an item at an apr rate of 17.99% interest, and pays all charges off in 2 months, what will the total amount paid for the item be. Assuming there is no annual fee and the minimum finance charge is $2.00
To calculate the total amount paid for the item, we need to consider the principal amount borrowed, the interest rate, and the time it takes to pay off the charges.
Let's break down the problem step by step:
1. Determine the principal amount:
- Unfortunately, the principal amount is not mentioned in the question. In order to determine the total amount paid, we need to know the principal amount borrowed. Once we determine the principal, we can proceed with the calculation.
2. Calculate the interest:
- The interest rate is given as 17.99% APR (Annual Percentage Rate). To find the monthly interest rate, we divide the APR by 12:
Monthly Interest Rate = (APR / 12) = (17.99 / 12) = 1.4992%
3. Calculate the interest charge for two months:
- Since the charges are paid off in 2 months, we need to calculate the interest for that period. To do this, multiply the monthly interest rate by the principal amount borrowed and the time period (2 months):
Interest Charge = (Monthly Interest Rate * Principal Amount Borrowed * Time Period)
However, without the principal amount, we cannot calculate the exact interest charge.
4. Consider the minimum finance charge:
- The problem states that the minimum finance charge is $2.00. This means that even if the interest calculated in step 3 is less than $2.00, the minimum finance charge will be applied.
Once we determine the principal amount borrowed, we can calculate the interest charge and then add the minimum finance charge to find the total amount paid for the item.