Levi would like to use a credit card to make a $3000 purchase. He is considering two credit options. The first requires a down payment of $1000 followed by monthly payments of $125. The second requires a down payment of $1300 followed by monthly payments of $110. The two options accumulate the same amount of interest and require the same number of monthly payments.
What is the amount of interest for this loan?
$800
$500
$1,000
$320
$500
To find the amount of interest for each loan option, we can subtract the total payments made from the total amount paid.
For the first option:
Down payment = $1000
Monthly payment = $125
Number of payments = (Total amount - Down payment) / Monthly payment = (3000 - 1000) / 125 = 16 payments
Total amount paid = Down payment + (Monthly payment * Number of payments) = 1000 + (125 * 16) = $3000
Interest = Total amount paid - Loan amount = 3000 - 3000 = $0
For the second option:
Down payment = $1300
Monthly payment = $110
Number of payments = (Total amount - Down payment) / Monthly payment = (3000 - 1300) / 110 = 16 payments
Total amount paid = Down payment + (Monthly payment * Number of payments) = 1300 + (110 * 16) = $3060
Interest = Total amount paid - Loan amount = 3060 - 3000 = $60
Therefore, the amount of interest for this loan is $60.