Math

Katherine uses her credit card to purchase a new television for $709.15. She can pay off up to $350 per month. The card has an annual rate of 25.7% compounded monthly.

How much will she pay in interest?

  1. 👍 0
  2. 👎 0
  3. 👁 1,257
  1. interest for 1st month = 709.15(.257)/12 = 15.19
    balance at end of 1st month = 709.15 + 15.19 - 350
    = 374.34

    interest for 2nd month = 374.34(.257)/12 = 8.02
    balance at end of 2nd month = 374.34 + 8.02 - 350
    = 32.35

    interest for 3rd month = 32.35(.257)/12 = .69
    amount due = 32.35 + .69
    = 33.04

    ** So the total she paid for her $709.15 TV was
    350+350+3304 = $733.04

    her interest paid = 733.04 - 709.15 = $23.89

    the calculation shown as ** is actually not valid even though it is done all the time. We cannot add up amounts of money that are not at the same "time spot".

    e.g. If I deposit $500 now and another $500 two years from now , I will not have $1000 two years from now, unless I totally disregard any interest rate.

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  2. Thank you so much for the explanation.

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    2. 👎 0
  3. not sure what the exact answer is here you should have stated the answer clearly

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