Question

QUESTION 1

A credit card has a balance of $1,400. The APR is 25% and the minimum payment is 3% of the balance. You will pay the minimum balance this month. If you do not use the card again then how much
should the balance be next month?
QUESTION 2
A credit card with an APR of 18% has a balance of $2500 on it. You make a $1400 payment that posts on the 11th day of a 31-day month. How much interest will you be charged for the month?
QUESTION 3
Suppose we have a card with an APR of 25%. The minimum payment is 7% of the balance Suppose we have a balance of $350 on the credit card. We decide to stop charging and to pay it off by making
the minimum payment each month.
Calculate the new balance after the first minimum payment is made.
Calculate the minimum payment that is due the next month.
QUESTION 4
Your credit card has a balance of $2500 and an interest rate of 21%. The credit card requires a minimum payment of 3%
Lennors

Answer 1

Q1: $1,360, Q2: $30.83, Q3: $325.50, Q4: $75

Explanation:

QUESTION 1:

If the minimum payment is made and no additional charges are made, the balance next month should be $1,400 minus 3% of $1,400, which is $1,360.

QUESTION 2:

To calculate the interest charged for the month, we need to determine the average daily balance. Assuming no other transactions, the average daily balance would be (($2,500 * 20) + ($1,100 * 10)) / 31 = $2,032.26. Multiply this by the APR of 18% and divide by 365 to get the daily interest rate. The interest charged for the month would be approximately ($2,032.26 * 0.18) / 365 * 31 = $30.83.

QUESTION 3:

After making the first minimum pyment, the new balance would be $350 minus 7% of $350, which is $325.50.

To calculate the minimum payment due the next month, we take 7% of the new balance, which is 7% of $325.50, equal to $22.79 (rounded to the nearest cent).

QUESTION 4:

The minimum payment required on a balance of $2,500 would be 3% of $2,500, which is $75.