Mark is getting ready for an important interview and needs to buy clothes to look presentable. His roommate, Andy, also has no money, but he has a credit card. Knowing that nobody will let Mark use Andy’s credit card, Mark asks Andy to pull out a cash advance for $150.00. Andy agrees under the condition that Mark is responsible for all interest that accrues on the cash advance which is a 25% interest rate, compounded monthly. The $120 cash advance is repaid in monthly installments over 3 years. How much should Andy ask Bill to pay in interest for the cash advance?
Hint: use this formula P = P V times StartFraction i over 1 minus (1 + i) superscript negative n Baseline EndFraction where PV is the $150, i is the APR divided by 12, and n is how long it will take to pay back the interest. Don't forget to take P (monthly payment) and multiply by 36 months, which will give you the cost of the cash advance plus interest. Finally, subtract $150 from this amount to figure out the interest Mark owes Bill.
a.
$3.88
b.
$64.70
c.
$120.00
d.
$232.80