Suppose you owe $1,100 on your credit card. The annual percentage rate (APR) is 24%, compounded monthly. The credit card company says your minimum monthly payment is $24.75. a. If you make only this minimum payment, how long will it take for you to repay the $1,100 balance (assuming no more charges are made)? b. If you make the minimum payment plus $7.17 extra each month (for a total of $31.92), how long will it take to repay the $1,100 balance? c. Compare the total interest paid in Part (a) with the total interest paid in Part (b).
Suppose you owe $1,100 on your credit card. The annual percentage rate (APR) is 24%, compounded monthly. The credit card company says your minimum monthly payment is $24.75. a. If you make only this minimum payment, how long will it take for you to repay the $1,100 balance (assuming no more charges are made)? b. If you make the minimum payment plus $7.17 extra each month (for a total of $31.92), how long will it take to repay the $1,100 balance? c. Compare the total interest paid in Part (a) with the total interest paid in Part (b).
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Transcribed Image Text:**Credit Card Repayment Analysis**
Suppose you owe $1,100 on your credit card. The annual percentage rate (APR) is 24%, compounded monthly. The credit card company says your minimum monthly payment is $24.75.
**Questions:**
a. If you make only this minimum payment, how long will it take for you to repay the $1,100 balance (assuming no more charges are made)?
b. If you make the minimum payment plus $7.17 extra each month (for a total of $31.92), how long will it take to repay the $1,100 balance?
c. Compare the total interest paid in Part (a) with the total interest paid in Part (b).
---
**Tasks:**
a. It will take ⬜ months for you to repay the initial balance. *(Round to the nearest whole number.)*
b. It will take ⬜ months for you to repay the initial balance. *(Round to the nearest whole number.)*
c. The difference in the total interest paid in Part (a) and Part (b) is $⬜. *(Round to the nearest dollar.)*
Expert Solution
Step 1: Analysis of given data
Principal = $1,100
APR = 24%
Minimum monthly payment = $24.75
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