Correct answers:
89249.80
Secured Unsecured
Credit APR APR
Excellent 4.75% 5.50%
Good 5.00% 5.90%
Average 5.85% 6.75%
Fair 6.40% 7.25%
Poor 7.50% 8.40%
Use the table above for interest rate questions.
If your parents’ credit rating for question 18 had been average, how much is the principal balance at the end of the first month after applying the $925.67 payment?
To calculate the principal balance at the end of the first month after applying the $925.67 payment with an average credit rating, we need to consider the interest rate for secured credit, which is 5.85% APR.
First, we calculate the interest for the month:
Interest = Principal Balance * Monthly Interest Rate
Monthly Interest Rate = Annual Interest Rate / 12 months
Monthly Interest Rate = 5.85% / 12 = 0.4875%
Interest = $24253.47 * 0.004875 = $118.39
Next, we subtract the interest from the payment to find out how much of the payment goes towards the principal:
Principal Payment = Payment - Interest
Principal Payment = $925.67 - $118.39 = $807.28
Finally, we subtract the principal payment from the previous balance to get the new principal balance:
New Principal Balance = Principal Balance - Principal Payment
New Principal Balance = $24253.47 - $807.28 = $23446.19
Therefore, with an average credit rating, the principal balance at the end of the first month after applying the $925.67 payment would be $23,446.19.