Question

Levi would like to use a credit card to make a $3000 purchase. He is considering two credit options. The first requires a down payment of $1000 followed by monthly payments of $125. The second requires a down payment of $1300 followed by monthly payments of $110. The two options accumulate the same amount of interest and require the same number of monthly payments. What is the amount of interest for this loan?

Answer 1

Answer: $500

Explanation:

Hi, since both credit options accumulate the same amount of interest:

1000+125x=1300+110x

Solving for x(number of months)

125x-110x =1300-1000

15x = 300

x =300/15

x= 20 months

Replacing x =25 in one equation:

1000+125x =

1000+125(20)=

1000+2500= $3500

Finally, we have to subtract the amount of the purchase (3000) to the result obtained:

3500-3000=$500

Feel free to ask for more if needed or if you did not understand something.