Chapter 4, Problem 25AA

To determine

To mention: The amount charged on credit card.

Explanation of Solution

Given Information:

The charges on credit card were $1000,

Interest rate is 15% (not variable)

Fee paid monthly of $50.

At the time of paying debt, the extra amount charged will be the interest on the amount borrowed which is not paid on a timely basis. For instance, the credit charges were $1,000, which should be paid within 2 months. If the amount is not paid within the time frame, then additional interest can be charged on the credit amount borrowed. The additional amount of $140 will be the interest charges on the amount of $1,000.

This amount is required to be paid off if person wants to clear its debt.