Question

Ashley has a balance of $4,000 on her credit card with an annual interest rate of 13%. To pay off the $4,000 in three years, Ashley will have to make a minimum payment of $134.78 per month. To pay off the $4,000 in five years, Ashley will have to make a minimum payment of $91.01 per month. How much more interest will Ashley pay when the length of the loan changes from 3 years to 5 years?

Answer 1

$608.52

Explanation:

Ashley's payment total for 3 years is ...

(36 months) × (134.78/month) = $4852.08

Her total for 5 years is ...

(60 months) × (91.01/month) = $5460.60

The difference in these is the difference in interest cost:

$5460.60 -4852.08 = $608.52

When the loan is 5 years, Ashley pays $608.52 more interest.