Questions 2, 3, and 4 Total Interest Credit Card Balance Minimum/Fixed Number of
ID: 2815026 • Letter: Q
Question
Questions 2, 3, and 4 Total Interest Credit Card Balance Minimum/Fixed Number of Payment Interest Rate Months to Pay in Paid Full Impact of Interest Rates $5,000 Full-approx 104$4642.85 Minimum (interest+1% of balance) Minimum (interest+1% of balance) 1396 1 months $5,000 18% Full-approx 66 $4736.83 1 months Impact of Payment Amounts $2,000 $1874.92 Minimum (interest+ 1% of balance Fixed $100 Full-aprox 61 1 months 15% $2,000 1596 Full 13 months$0 In the "Impact of Interest Rates" example, a 5% interest rate difference results in how much extra interest paid when making only a required minimum monthly payment equal to the monthly interest, plus 1% of the outstanding balance? 2. 3. In the "Impact of Payment Amounts example, how much total interest would you save by making a fixed payment of $100 per month instead of the required minimum payment equal to the monthly interest, plus 1% of the outstanding balance? How much quicker would you be able to pay off the $2,000 credit card balance by making a fixed payment of $100 each month instead of the required minimum payment? 4.Explanation / Answer
2. Impact of Interest Rates - Extra Interest paid if the Rate of interest is 5% higher is (4,736.83 - 4,642.85) 93.98.
3. Impact of Payment Amounts - The total interest of 1,874.92 (1,874.92 - 0) will be saved if we make a fixed payment of $100 per month.
4. If we make a fixed payment of $100 each month then we will be able to pay off the credit card balance of $2,000 within 13 months which is (61 months - 13 months) 48 months quicker than payming the the minimum payment each month.
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