1. Mason has a credit card debt of $15,600 that he would like to reduce by applying $8,500 of his inheritance money to the
balance.
In addition, he would like to modify his debt payment plan to pay off the remaining balance in 24 months rather than 60
months.
His credit card has an APR of 18%. How much will these changes save Mason in finance charges (interest)?
Hint: 1st, subtract 8500 from 15,600 to find the remaining balance he will pay in 24 months.
Use the formula
P=PV* (1/(1-(1+0)^n) where PV is the remaining balance, i-0.18/12, and n-24 months.
2nd, multiply your answer in step 2 by 24 months to find out the total amount you paid in 24 months.
3rd, find the interest you paid by subtracting 7100 from the amount you found in step 2.
4th, find out how much you would have paid had you not reduced the amount you owed by 8500 (in other words, 15,600).
Use the same monthly formula in step 1 where PV-15,600, i-0.18/12, and n-60 months.
5th, multiply the answer in step 4 by 60 months to find out how much you paid in total.
6th, to find the interest, subtract the amount in step 5 from 15,600 to find the interest.
Finally, find the difference between step 3 and step 6, and that is how much you saved.
a. $1,407.04
b. $3,302.59
c. $6,760.96
d. $8,168.40