Chapter 4, Problem 24AA

To determine

The reason for increase in number of payments if interest charges are included.

Explanation of Solution

Given Information:

The charges will be $1000

Fixed interest is 15%

Payment on monthly basis can be made of $50

On a credit card, the amount of interest is charged after certain period. Later the amount of interest will be higher as compared to the amount if paid earlier. The interest rate given is for annual period which is also known as annual percentage rate. There are various cost involved with credit cards such as membership fee, finance charges and the APR.

Therefore, the amount which is to be paid will be higher which will take longer time duration to pay when $50 is paid monthly.