Question

You have a credit card with a balance of $1,187.92 and the interest is 12.25% APR. A late fee of $30.00 is charged for payments after the due date. You missed your payment due date, but plan to make a payment of $125.00 on the next due date. What will be the new principal after that payment?

A) $1,242.39
B) $1,105.05
C) $1,117.61
D) $1,062.92

Answer 1

C)$1,117.61

Explanation:

The balance on the credit card is $1187.92 with interest of 12.25%.

r = 12.25% = 12.25/100 = 0.1225

A late fee = $30

Amount = P(1 + r/12)^1 + late fee

Now plug in the given values in to the formula, we get

1187.92 (1 + 0.1225/12) + 30

= 1200.05 + 30

= $1230.05

During the next due date, you pay $125, so the new balance

1230.05 (1 + 0.1225/12) - 125

= $1117.61

Thank you.