Question

Review the information given based on a principal balance of $18,000 to answer the question:

FICO Score Simple Interest Rate Total # of Payments Total Amount Paid
800-850 12%
29
740-799 15%
33
670-739 18%
38
48
580-669 21%
300-579 28%
60
$20,160.00
$20,700.00
$21,240.00
$21,780.00
$23,040.00
Calculate the percent increase in the amount of interest paid between a household with a 740 credit score and one with a
730 credit score. Round the final answer to the nearest tenth. (4 points)
O 20.0%
O 17.3%
O 19.5%
O 18.4%

Answer 1

To calculate the percent increase in the amount of interest paid between a household with a 740 credit score and one with a 730 credit score , we need to find the total amount paid for each score and then calculate the percent increase.

From the given table , we can see that the simple interest rate for a credit score of 740-799 is 15%, and the total number of payments is 33 . So, the total amount paid for a principal balance of $18,000 with a credit score of 740 is:

Principal + Total Interest = Total Amount Paid

$18,000 + ($18,000 * 15% * 33/12) = $20,700

Similarly, for a credit score of 730, we need to use the simple interest rate for a credit score of 670-739 , which is 18%, and the total number of payments is 38. So, the total amount paid for a principal balance of $18,000 with a credit score of 730 is:

Principal + Total Interest = Total Amount Paid

$18,000 + ($18,000 * 18% * 38/12) = $21,240

Now, to calculate the percent increase in the amount of interest paid , we can use the following formula:

Percent increase = |(New value - Old value) / Old value| * 100%

Plugging in the values, we get:

Percent increase = |($21,240 - $20,700) / $20,700| * 100%

Percent increase = 2.6%

Rounding to the nearest tenth, we get the final answer as:

Percent increase = 2.6% ≈ 2.5% (rounded to the nearest tenth)

Therefore, the answer is O 2.5%.

Explanation: