Newton uses a credit card with a 18.6% APR, compounded monthly, to pay for a cruise totaling $1,920.96. He can pay $720 per month on the card. What will the total cost of this purchase be?

Question

Mathematics

Deon Lynn

19 November, 10:08

Newton uses a credit card with a 18.6% APR, compounded monthly, to pay for a cruise totaling $1,920.96. He can pay $720 per month on the card. What will the total cost of this purchase be?

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Answers (1)

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Naima Parsons · Answer 1

The APR is 18.6%. This means that every month, 18.6 : 12 = 1.55%

We can solve the total cost with a simple amortization:

Balance after Month 1: 1920.96 * 1.0155 = 1950.74

Payment of 720 reduces the balance to 1230.74

Balance after Month 2: 1230.74 * 1.0155 = 1249.81

Payment of 720 reduces the balance to 529.81

Balance after Month 3: 529.81 * 1.0155 = 538.02

Payment of 538.02 settle the payment.

Newton paid 720 in month 1, 720 in month 2, and settled the debt in month 3 with a payment of 538.02

His total payment is 720 + 720 + 538.02 = 1978.02