Question

Roberto's credit card has a beginning balance of $7,500 on May 1. He makes no transactions in May, and the minimum payment due is $300 on May 31. The APR is 23%. If she only pays the minimum payment, how much of the payment will go toward the principal?

a) $300
b) $1,725
c) $1,725.62
d) $7,200

Answer 1

Roberto's minimum payment of $300 will have $156.225 go toward the principal after subtracting the interest for May, which is $143.775.

Step-by-step explanation:

The question is asking us to determine how much of Roberto's minimum payment will go toward the principal of his credit card debt. First, we need to calculate the interest for the month of May using the Annual Percentage Rate (APR). Since the APR is 23%, the monthly interest rate is 23% divided by 12 months, which equals to approximately 1.917%. Applying this to the beginning balance of $7,500, we get $7,500 x 0.01917 = $143.775. This is the amount of interest accumulated for the month of May. Roberto's minimum payment is $300. To find out how much of this payment goes toward the principal, we subtract the interest for May from the minimum payment: $300 - $143.775 = $156.225. Therefore, $156.225 of Roberto's payment will go toward reducing the principal debt.