Question

Sam has a credit card balance of $562.37. He paid $200 of the balance this month and plans to pay the remainder of it next month. The annual interest rate for Sam’s credit card is 17.9%, which means he will pay 1.49% interest per month.

a. If Sam makes no other payments or charges on the credit card during the next month, what is the amount of interest that will be added to his next month’s bill? (3 points)

b. What will be the total amount Sam will owe on his credit card next month if he plans to pay the balance in full?

Answer 1

After making a $200 payment on his credit card with an initial balance of $562.37, Sam's new balance is $362.37. The interest for the next month at a monthly rate of 1.49% will be $5.40. Therefore, the total amount Sam will owe next month, if he pays the balance in full, is $367.77.

Step-by-step explanation:

To calculate the interest that will be added to Sam's next month's bill, first we have to determine the new balance after his $200 payment. The original balance was $562.37. After the payment:

• New balance = $562.37 - $200 = $362.37

Now, we need to apply the monthly interest rate to the new balance to find out the interest for the next month:

• Interest for the next month = New balance × Monthly interest rate
• Interest for the next month = $362.37 × 1.49%
• Interest for the next month = $362.37 × 0.0149
• Interest for the next month = $5.40 (rounded to two decimal places)

The interest that will be added to the next month's bill is therefore $5.40.

Next, we determine the total amount Sam will owe:

• Total amount = New balance + Interest for the next month
• Total amount = $362.37 + $5.40
• Total amount = $367.77

Sam will owe a total of $367.77 on his credit card next month if he plans to pay the balance in full.