Question

June has a credit card balance of $4,350 that comes with a 19% APR. She would like to have the balance paid off in the next 8 months, but she is having trouble making the monthly payments required to do so. In order to lower her monthly payments, she decides to sell her porcelain doll collection for $2,000 to apply directly to her credit card balance. June still wants to pay off the balance in 8 months. By applying the doll money, how much has June lowered her minimum monthly payment?

a. $145.62

b. $268.14

c. $315.06

d. $583.20

Answer 1

It's B on E2020, I just took the test.

Answer 2

b. $268.14

Explanation:

Original credit card monthly payment =

`p((i(1+i)^(n) )/((1+i)^(n)-1 ) )`

where

Principal= $4350

i= 19/12/100=0.01583

n= 8

Putting the values in formula we get:

`4350((0.01583(1+0.01583)^(8) )/((1+0.01583)^(8)-1 ) )`

We get A1= $583.19

Now, she paid $2000 making new principle = $2350

i and n are same.

`2350((0.01583(1+0.01583)^(8) )/((1+0.01583)^(8)-1 ) )`

We get A2=315.06

Difference between A1 and A2=
`583.19-315.06=268.13`

Therefore, June lowered her minimum monthly payment by $268.13 close to option B.

Hence, option B is correct.