Answer:
Thus, for making installment payments, the credit card holder incurred the additional cost of Option D.
Explanation:
The credit card holder paid an additional D. $559.56 over the 12 months versus paying the balance in full before the end of the first month.
How is the additional payment determined?
The additional payment made by the credit card holder results from paying installments instead of clearing the balance in the first month.
Installment plans attract finance charges at an annual percentage rate (APR), which increases the total amount paid.
Therefore, the additional payment is the difference between the total installment payments and the credit card balance at the beginning of the first month.
N (# of periods) = 12 months
I/Y (Interest per year) = 11.99%
PV (Present Value) = $6,299.59
PMT (Periodic Payment) = $-350
Results:
FV = $3,009.15
Sum of all periodic payments = $3,850 ($350 x 11)
Total Interest = $559.57
The total amount paid over the 12 months = $6,859.15 ($3,009.15 + $3,850)
The total amount paid in full in the first month = $6,299.59
Additional payment made via installments = $559.56 ($6,859.15 - $6,299.59)
Thus, for making installment payments, the credit card holder incurred the additional cost of Option D.