Question

Jake owes $3,990 on a credit card with an APR of 13.9 percent. How much more will it cost him to pay off this balance if he makes monthly payments of $50 rather than $60? Assume he does not charge any further purchases.

Answer 1

Answer:

$3,545

Explanation:

PV = 3990

APR = .139

PV = $3,990 = $50 × (1 - {1 / [1 + (.139 / 12)]t}) / (.139 / 12)

t = 224.16 months.

PV = $3,990 = $60 × (1 - {1 / [1 + (.139 / 12)]t}) / (.139 / 12)

t = 127.72 months.

Additional cost = (224.16 ×$50) - (127.72 ×$60) = $3,545

It will cost Jake $3,545 to pay off his balance, if he makes monthly payments of $50 rather than $60.