### Understanding Interest on Credit Card Debt**Problem Statement:**Jamie wants a new smart TV/sound system that costs $1,250. He does not have that much in cash to purchase it, so he uses a credit card with 18% annual interest. He puts $250 down, but he only pays the interest each month on that credit card debt. About how much will he pay in interest over 4 years?**Multiple Choice Answers:**- **A:** $1000- **B:** $720- **C:** $500- **D:** $800#### Solution Explanation:To determine how much Jamie will pay in interest over four years, we'll follow these steps:1. **Calculate the remaining principal**: After making a $250 down payment on the $1,250 TV/sound system, Jamie has $1,250 - $250 = $1,000 left to pay.2. **Understand the interest rate**: - Annual interest rate = 18% - Monthly interest rate = 18% / 12 months = 1.5%3. **Calculate monthly interest**: - Since Jamie is only paying the interest each month, interest paid monthly = 1,000 * 1.5% = $154. **Calculate total interest over 4 years**: - Interest per year = $15 * 12 months = $180 - Interest over 4 years = $180 * 4 = $720Thus, over four years, Jamie will pay approximately **$720** in interest on the credit card debt.**Correct Answer: B ($720)**

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Jamie wants a new smart TV/sound system that costs $1,250. He does not have that much in cash to purchase it, so he uses a credit card with 18% annual interest. He puts $250 down, but he only pays the interest each month on that credit card debt. About how much will he pay in interest over 4 years? A $1000 B $720 C) $500 D $800

Jamie wants a new smart TV/sound system that costs $1,250. He does not have that much in cash to purchase it, so he uses a credit card with 18% annual interest. He puts $250 down, but he only pays the interest each month on that credit card debt. About how much will he pay in interest over 4 years? A $1000 B $720 C) $500 D $800

Algebra and Trigonometry (6th Edition)

6th Edition

ISBN:9780134463216

Author:Robert F. Blitzer

Publisher:Robert F. Blitzer

ChapterP: Prerequisites: Fundamental Concepts Of Algebra

Section: Chapter Questions

Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...

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Question

### Understanding Interest on Credit Card Debt

**Problem Statement:**

Jamie wants a new smart TV/sound system that costs $1,250. He does not have that much in cash to purchase it, so he uses a credit card with 18% annual interest. He puts $250 down, but he only pays the interest each month on that credit card debt. About how much will he pay in interest over 4 years?

**Multiple Choice Answers:**

- **A:** $1000
- **B:** $720
- **C:** $500
- **D:** $800

#### Solution Explanation:

To determine how much Jamie will pay in interest over four years, we'll follow these steps:

1. **Calculate the remaining principal**: After making a $250 down payment on the $1,250 TV/sound system, Jamie has $1,250 - $250 = $1,000 left to pay.

2. **Understand the interest rate**:
- Annual interest rate = 18%
- Monthly interest rate = 18% / 12 months = 1.5%

3. **Calculate monthly interest**:
- Since Jamie is only paying the interest each month, interest paid monthly = 1,000 * 1.5% = $15

4. **Calculate total interest over 4 years**:
- Interest per year = $15 * 12 months = $180
- Interest over 4 years = $180 * 4 = $720

Thus, over four years, Jamie will pay approximately **$720** in interest on the credit card debt.

**Correct Answer: B ($720)**

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