Determine the total amount of interest you will pay over the next 3 months on a credit balance of $725 if your credit card has an annual interest rate of 18% and you make monthly payments of 10% of the amount due, rounded to the nearest dollar.
month 1:
interest due = 725(.015) = 10.875
balance owing =735.875
payment made = 73.58
reduction in balance = 73.58 - 10.875 =62.71
balance at end of month 1 = 662.29
month 2
interest due = 662.29(.015) = 9.93
balance owing = 672.22
payment made = 67.22
reduction in balance = 67.22-9.93 = 57.29
balance at end of month 2 = 614.93
month 3
(repeat above steps)
add up the interest for the three months.
check my arithmetic
whats the answer
To determine the total amount of interest you will pay over the next 3 months, we need to calculate the interest for each month and then sum them up.
First, let's find the monthly interest rate. Since the annual interest rate is 18%, we divide it by 12 to get the monthly rate. Therefore, the monthly interest rate is 18% / 12 = 1.5%.
To calculate the amount due each month, we need to consider two factors: the remaining balance and the monthly payment. Since you make monthly payments of 10% of the amount due, we can assume that the monthly payments will decrease each month.
In the first month, the balance is $725. So the amount due is 10% of $725, which is $72.50.
To calculate the interest for the first month, we multiply the monthly interest rate by the balance. The interest for the first month is 1.5% * $725 = $10.88.
Now, we subtract the payment amount from the balance to get the remaining balance for the next month. In this case, the remaining balance is $725 - $72.50 = $652.50.
In the second month, the amount due is 10% of $652.50, which is $65.25.
To calculate the interest for the second month, we multiply the monthly interest rate by the remaining balance. The interest for the second month is 1.5% * $652.50 = $9.79.
Again, we subtract the payment amount from the remaining balance to get the balance for the next month. The balance for the third month is $652.50 - $65.25 = $587.25.
In the third month, the amount due is 10% of $587.25, which is $58.72.
To calculate the interest for the third month, we multiply the monthly interest rate by the remaining balance. The interest for the third month is 1.5% * $587.25 = $8.81.
Now, let's add up the individual interest amounts for each month: $10.88 + $9.79 + $8.81 = $29.48. Rounded to the nearest dollar, the total amount of interest you will pay over the next 3 months is $29.