Question

Newton uses a credit card with a 18.6% APR, compounded monthly, to pay for a cruise totaling $1,920.96. He can pay $720 per month on the card. What will the total cost of this purchase be?

Answer 1

$1947.32

Step-by-step explanation:

Most credit cards allow the balance to be paid in the first month without any finance charge. After Newton's first payment of $720 the remaining balance of $1200.96 will earn interest of 1.55% for the month, resulting in a new balance of 1219.57.

Following the second month's payment of $720, Newton's balance of $499.57 will earn 1.55% interest to become a new balance of $507.32. Newton can pay that off in the 3rd month.

Newton's total of payments is ...

... $720 +720 +507.32 = $1947.32

_____

This amount includes $26.36 in interest charges.

Answer 2

It will take about 3 months to payoff the entire card. $56.01 of total interest will be paid. The total cost of the purchase will then be the initial cost with the interest paid added on. 1976.97 will be the total cost.