Final answer:
To calculate the amount of interest you will pay for the 3rd month, calculate the balance at the end of the 2nd month and use the formula: Interest = Average Daily Balance x Monthly Interest Rate. For a balance of $1,250.00 and minimum payments of $25.00 at 18% APR, the interest for the 3rd month would be $18.56.
Step-by-step explanation:
To calculate the amount of interest you will pay for the 3rd month, we need to first calculate the balance at the end of the 2nd month. Starting with a balance of $1,250.00, you make minimum payments of $25.00, so the balance at the end of the 2nd month would be $1,250.00 - $25.00 = $1,225.00.
The interest for each month is calculated based on the average daily balance. For simplicity, let's assume there are 30 days in a month. The average daily balance for the 2nd month would be ($1,250.00 + $1,225.00) / 2 = $1,237.50.
The interest for the 3rd month can be calculated using the formula: Interest = Average Daily Balance x Monthly Interest Rate. The monthly interest rate is the APR divided by 12 months, so for 18% APR, the monthly interest rate would be 18% / 12 = 1.5%.
Plugging in the values, the interest for the 3rd month would be $1,237.50 x 1.5% = $18.56.