Assume that you have a balance of $4500 on your Discover credit card and that you make no more charges. Assume that Discover charges 27% APR and that each month you make only the minimum payment of 2% of the balance. What will the balance be after 32 months?

(Round your answer to the nearest cent.)

Guest Apr 12, 2020

edited by
Guest
Apr 12, 2020

#1**+1 **

I took the "balance" to mean "principal + interest" at the end of each month. Because the interest of 27% APR =0.27/12 =2.25% per month, is greater than the minimum payment of 2%, the loan will continue to grow bigger and bigger each month for 32 months.

a=4500;p=1; b=(0.27/12 + 1);c=(a*b - 0.02*a*b);a=c;printp,"-",c; p++;if(p<=32, goto3, 0)

OUTPUT:

1 - 4509.23

2 - 4518.47

3 - 4527.73

4 - 4537.01

5 - 4546.31

6 - 4555.63

7 - 4564.97

8 - 4574.33

9 - 4583.71

10 - 4593.11

11 - 4602.52

12 - 4611.96

13 - 4621.41

14 - 4630.89

15 - 4640.38

16 - 4649.89

17 - 4659.42

18 - 4668.98

19 - 4678.55

20 - 4688.14

21 - 4697.75

22 - 4707.38

23 - 4717.03

24 - 4726.7

25 - 4736.39

26 - 4746.1

27 - 4755.83

28 - 4765.58

29 - 4775.35

30 - 4785.14

31 - 4794.95

32 - 4804.78

Guest Apr 12, 2020

#2**+1 **

You start with $4500.00.

Each month the credit card company adds onto this an amount of interest:

since it si 27% per year, it will be a multiple of 0.27/12 and added onto the previous balance

this can be found by multiplying the old balance by (1 + 0.27/12)

After this, each month your payment of 7% is deducted from the amount owed:

this can be found by multiplying what you owe by 0.93 (if you pay off 7%, you still owe 93%)

To do this for 32 months, you have to do this 32 times:

since it requires multiplying 32 times, you can just raise the multiple to the power of 32.

4500 x [ (1 + 0.27/12) x (0.93) ]^{32}

I got an answer of slightly under $900.00

geno3141 Apr 12, 2020