Question

3. "Frank has four different credit cards, the balances and interest information of which are outlined in the table below.

He would like to consolidate his credit cards to a single credit card with an APR of 18% and pay off the balance in 24 months.

What will his monthly
credit card payment be?
Hint use the monthly payment formula where PV = (all balances combined), i=0.18/12, and n=24

A. $390.00

B. $462.91

C. $454.31

D. $52.00

Answer 1

Therefore, Frank's monthly credit card payment will be $454.31.

Explanation:

Monthly payment = (PV * r) / (1 - (1 + r)^-n)

PV = $2,500 + $1,000 + $3,000 + $1,500

= $8,000

r = 0.18 / 12

= 0.015

Monthly payment = ($8,000 * 0.015) / (1 - (1 + 0.015)^-24)

= $454.31