Question

Ellen has maxed out her credit card at $19,500 and vows not to make any other credit card purchases. Her credit card company charges 1. 5% interest per

month, and the minimum monthly payment is all interest due plus 3% of the principal balance. How much of the balance can Ellen pay down if she pays the

minimum payment only for 3 months? Round the answer to the nearest cent.



After three months, Alan would have paid off how many dollars?

Answer 1

$538

Explanation:

The minimum payment in the first month would be:

Minimum payment = 1.5% * $19,500 + 3% * $19,500 = $292.25

At the end of the first month, the balance would be:

Balance = $19,500 + $19,500 * 1.5% - $292.25 = $19,318.375

In the second month, the minimum payment would be:

Minimum payment = 1.5% * $19,318.375 + 3% * $19,318.375 = $291.26

At the end of the second month, the balance would be:

Balance = $19,318.375 + $19,318.375 * 1.5% - $291.27 = $19,138.89

In the third month, the minimum payment would be:

Minimum payment = 1.5% * $19,138.89 + 3% * $19,138.89 = $290.26

At the end of the third month, the balance would be:

Balance = $19,138.89 + $19,138.89 * 1.5% - $290.26 = $18,961.62

So, Ellen would have paid off $19,500 - $18,961.62 = $538.38. The answer rounded to the nearest cent is $538