You have a credit card that charges 18% per year interest or 1.5% per month . You buy a tv for $1000 on the credit card but at the end of the month you only pay $100. You continue to pay $100 the next month. You pay the entire balance in the third month. How much total interest did you pay over three months?
To calculate the total interest paid over three months, we need to determine the monthly interest charged and then multiply it by the number of months.
The credit card charges an interest rate of 18% per year, or 1.5% per month.
First, let's calculate the interest charged for the first month:
Interest = Principal * Rate
Interest = $1000 * 0.015 (1.5% as a decimal)
Interest = $15
Since you paid $100 at the end of the first month, the remaining balance on the credit card is:
Remaining Balance = Principal + Interest - Payment
Remaining Balance = $1000 + $15 - $100
Remaining Balance = $915
For the second month, let's calculate the interest charged on the remaining balance:
Interest = Remaining Balance * Rate
Interest = $915 * 0.015
Interest = $13.725 (rounded to $13.73)
Again, you make a $100 payment, so the remaining balance for the third month is:
Remaining Balance = Previous Remaining Balance + Interest - Payment
Remaining Balance = $915 + $13.73 - $100
Remaining Balance = $828.73
Finally, let's calculate the interest charged for the third month:
Interest = Remaining Balance * Rate
Interest = $828.73 * 0.015
Interest = $12.43
Therefore, the total interest paid over three months is:
Total Interest = Interest 1st month + Interest 2nd month + Interest 3rd month
Total Interest = $15 + $13.73 + $12.43
Total Interest = $41.16
So, you paid a total interest of $41.16 over three months.
To calculate the total interest paid over three months, we need to determine the balance at the end of each month and calculate the interest for each month.
Month 1:
- TV purchase: $1000
- Payment: $100
Remaining balance: $1000 - $100 = $900
Interest for Month 1:
- Monthly interest rate: 1.5%
- Interest: $900 * (1.5/100) = $13.50
Month 2:
- Balance: $900
- Payment: $100
Remaining balance: $900 - $100 = $800
Interest for Month 2:
- Monthly interest rate: 1.5%
- Interest: $800 * (1.5/100) = $12
Month 3:
- Balance: $800
- Payment: $800
Remaining balance: $800 - $800 = $0
Interest for Month 3:
- Monthly interest rate: 1.5%
- Interest: $0 * (1.5/100) = $0
Total interest paid over three months:
- Total interest = Month 1 interest + Month 2 interest + Month 3 interest
- Total interest = $13.50 + $12 + $0
- Total interest = $25.50
Therefore, the total interest paid over three months is $25.50.