Question

Assume you have a balance of $1200 on a credit card with an APR of 18%, or 1.5% per month. You start making monthly payments of $200, but at the same time you charge an additional $80 per month to the credit card. Assume that interest for a given month is based on the balance for the previous month. The following table shows how you can calculate our monthly balance. Complete and extend the table to show the balance at the end of each month until the debt is paid off. How long does it take to pay off the credit card debt? Fill out the table row by row, and continue until the last full payment. (Round to the nearest cent as needed.) Month Payment Expenses Interest 0 1 $200 $80 0 015 × $1200 = $18.00 2 $200 $80 New Balance $1200 $1200 - $200 ÷ $80 ÷ $18.00 = $1098.00 (0,1) More

Answer 1

To calculate the balance at the end of each month until the debt is paid off, use the formula: New Balance = Previous Balance - Payment + Expenses + (Previous Balance × Monthly Interest Rate).

Step-by-step explanation:

To calculate the balance at the end of each month until the debt is paid off, we will need to use the formula: New Balance = Previous Balance - Payment + Expenses + (Previous Balance imes Monthly Interest Rate)

Let's calculate the balance for each month:

• Month 0: Payment = $200, Expenses = $80, Interest = $0, New Balance = $1200 - $200 + $80 + ($1200 imes 0.015) = $1342.00
• Month 1: Payment = $200, Expenses = $80, Interest = $1342.00 imes 0.015 = $20.13, New Balance = $1342.00 - $200 + $80 + $20.13 = $1242.13
• Month 2: Payment = $200, Expenses = $80, Interest = $1242.13 imes 0.015 = $18.63, New Balance = $1242.13 - $200 + $80 + $18.63 = $1141.76
• Continue this process until the balance reaches zero.

Answer 2

Sure, here's the completed table:

Month Payment Expenses Interest Balance
0 - - - $1200.00
1 $200.00 $80.00 $18.00 $1018.00
2 $200.00 $80.00 $15.27 $853.27
3 $200.00 $80.00 $12.80 $686.07
4 $200.00 $80.00 $10.29 $516.36
5 $200.00 $80.00 $7.72 $344.08
6 $200.00 $80.00 $5.10 $169.18
7 $200.00 $80.00 $2.43 -$2.25

It takes 7 months to pay off the credit card debt. The negative balance in month 7 means that the debt has been fully paid off, and there is a credit balance of $2.25 remaining.

To calculate the balance for each month, we start with the previous month's balance, add any new expenses, subtract the payment, and then add the interest for the month. We continue this process until the balance becomes negative, indicating that the debt has been fully paid off. Note that the interest is calculated based on the previous month's balance, and is equal to 1.5% of that balance.