Determine the cost of credit for a 2-year, $5,000 credit card loan with a monthly payment of $257.67, which corresponds to a fixed compound interest rate of 21.3% compounded monthly. Round the answer to two decimal places as needed.
The cost of credit is $____.
To determine the cost of credit, we need to calculate the total amount paid minus the original loan amount.
First, let's calculate the total amount paid:
Total amount paid = Monthly payment * Number of payments
Number of payments = 2 years * 12 months/year = 24 months
Total amount paid = $257.67 * 24 = $6184.08
Next, let's calculate the cost of credit:
Cost of credit = Total amount paid - Original loan amount
Cost of credit = $6184.08 - $5000 = $1184.08
Therefore, the cost of credit for a 2-year, $5,000 credit card loan with a monthly payment of $257.67 and a 21.3% fixed compound interest rate compounded monthly is $1184.08.