Question

Your parents have a credit card with a balance of $2,748.56. The interest rate is 10.5%

V APR. A late payment fee of $40.00 is added to the principal if they pay after 6/1. They
make a payment for $300.00 on 6/1. How much interest did they pay?
$297.00
$24.40
$24.05
$288.60

Answer 1

The parents paid $24.05 in interest after making a $300 payment on the credit card with a 10.5% APR.

Step-by-step explanation:

The question asks to determine how much interest the parents had to pay after making a payment on their credit card. The credit card has a balance of $2,748.56, with an annual percentage rate (APR) of 10.5%. A payment of $300.00 was made on 6/1, and the question suggests that no late payment fee needs to be added since the payment was not late.

To calculate the interest, we would use the formula for simple interest: Interest = Principal × Rate × Time. Since credit card interest is typically compounded monthly, we need to convert the APR to a monthly rate by dividing by 12. Therefore, the monthly interest rate is 10.5% / 12 months = 0.875% per month. We'll also need to adjust the time period to reflect the monthly compounding period which is 1 in this case.

Thus, the interest paid in that month would be $2,748.56 × 0.00875 × 1 = $24.05.

Therefore, the parents paid $24.05 in interest on their credit card payment.

Answer 2

Answer: C) $24.05

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Step-by-step explanation:

10.5% is the annual interest rate

divide that over 12 to get the monthly rate

(10.5%)/12 = 0.875%

0.875% converts to 0.00875 after moving the decimal point 2 spots to the left.

Multiply this with the balance of 2748.56

2748.56*0.00875 = 24.0499

This rounds to 24.05 dollars.

We do not consider the $40 late fee because they made the payment on 6/1, means they do not get penalized.