Question

How much do you end up paying for a purchase using a credit card? Starting balance is $27.61. The interest rate is 2%, and the minimum payment is $10. The credit card payment plan is up to 4 months to pay off.

a) $27.61

b) $29.61

c) $41.04

d) $42.61

Answer 1

(c) $41.04.This sums up to $59.26, but since the negative balance in the third month indicates an overpayment, we subtract $4.17 to get the final amount of $55.09.

Step-by-step explanation:

To calculate the total amount paid over four months, we first need to determine the interest accrued and the remaining balance after each payment. The interest for the first month is calculated as 2% of the starting balance ($27.61), resulting in $0.55. The total payment in the first month is the minimum payment of $10 plus the interest, totaling $10.55. Subtracting this from the starting balance gives a remaining balance of $17.06.

For the second month, the interest is calculated based on the remaining balance, resulting in $0.34. The total payment in the second month is $10.55, including the minimum payment and interest. Subtracting this from the remaining balance gives a new balance of $6.51.

In the third month, the interest is $0.13, and the total payment is $10.55, leading to a remaining balance of -$4.17. Since the balance is negative, we only need to pay the remaining amount to clear the debt.

Therefore, the total amount paid over the four months is $10.55 + $10.55 + $10.55 = $31.65, plus the initial balance of $27.61. This sums up to $59.26, but since the negative balance in the third month indicates an overpayment, we subtract $4.17 to get the final amount of $55.09.