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Cynthia had a credit card with a 17% APR and a $3,265 balance. She had budgeted to have the credit card paid off in 24 months. But after missing a single monthly payment, Cynthia’s credit card company has increased her interest rate to 21%. How much extra will Cynthia have to pay in finance charges (interest) because of the increase in her APR if she still pays off the credit card in 24 months?

2 Answers

4 votes
The correct answer is a.$152.16
User Dr Hannibal Lecter
by
7.6k points
3 votes

Answer:

Cynthia will have to pay $152.16 extra due to increase in her APR.

Explanation:

The EMI formula is =


(p*r*(1+r)^(n) )/((1+r)^(n)-1 )

Scenario 1st:

p = 3265

r =
17/12/100=0.014166

n = 24

Putting the values in the formula:


(3265*0.014166*(1.014166)^(24) )/((1.014166)^(24)-1 )

= $ 161.44

Scenario 2nd:

p = 3265

r =
21/12/100=0.0175

n = 24

Putting the values in the formula:


(3265*0.0175*(1.0175)^(24) )/((1.0175)^(24)-1 )

= $ 167.78

The difference between these two are :


167.78-161.44=6.34 per month

So, for 24 months, the charge will become =
6.34*24=152.16 dollars.

Therefore, Cynthia will have to pay $152.16 extra due to increase in her APR.

User Dhwani Katagade
by
8.1k points
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