Question

Salvatore's credit card has an APR of 14.9% calculated on the previous monthly balance. His credit card record for the last 7 months is shown in the table below.Salvatore is trying to figure out what this all means. Help him by answering the following questions. Part 1: What is the total amount that Salvatore has paid in interest over the 7 months? Part II: What is the total amount that Salvatore has made in payments over the 7 months? Part III: How much of Salvatore's payments has gone to paying down the principal on his account? Part IV: What is Salvatore's new balance at the end of month 8? Part V: What will Salvatore be charged for interest for month 8?

Answer 1

A payment rate for a credit card

APR = 14.9% its based on 12 months

Time = 7 months

Part 1) Amount paid in interest (7 months)

Based on table

Interest = Finance charges

14.9% anual = (14.9/12)% monthly = 1.24% month

Interest payments are in 7 months:

Add column 6 = (Previous balance + New charges - New balance)

18.38 + 17.39 +14.98+14.46+10.48+9.08 = $84.77 dollars

Part ll

Payments in 7 months

Add column 5 (its 1.24% of previous balance)

0 + 6.62+ 7.61+10.02+10.54+14.52+15.92 = $65.23 dollars

Part lll

How much payments are going to principal

Substract $25 minus Principal paid, for every data

= 25-18.38 ,25-17.39, 25-14.98-, 25-14.46, 25-10.48, 25-9.08

= (25x6) - 84.77 = 150-84.77 = 65.23

= $65.23. Dollars

Part IV

New balance at month 8

= 1281.91 + 79.99 -9.08 = $ 1352.82

Part V

Interest payment for month 8

Its 1.24% of 1281.91 = $15.92 dollars