Answer:
a. 31 months
b. $818.32
c. $168.32 interest
Explanation:
Given that Joe makes a minimum payment of $21.45 on his credit card purchase of $650 with an APR of 19.85%, you want to know ...
- how long until the purchase is paid off
- the total amount paid
- the cost of using the credit card
a. Payoff time
If the balance is reduced by $21.45 per month, it will take ...
$650/($21.45/mo) ≈ 30.3 months
to pay off the balance.
Joe will be making payments for 31 months.
b. Payoff amount
The total amount Joe pays for his sound system is the sum of its initial cost and the total of interest payments. That sum is ...
cost + interest = total paid
$650 +168.32 = $818.32
Joe will pay a total of $818.32.
c. Credit charges
The total amount of interest Joe pays is $168.32.
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Additional comment
If the total payment each month is $21.45, then it will take 43 months to pay off the system, for a total cost of $909.61, of which $259.61 is the cost of the credit. (The finance charge is paid first from this payment amount, so the amount that goes to reduce the balance is less.)