Asked by Steve
                Katherine uses her credit card to purchase a new television for $709.15. She can pay off up to $350 per month. The card has an annual rate of 25.7% compounded monthly. 
How much will she pay in interest?
            
            
        How much will she pay in interest?
Answers
                    Answered by
            Reiny
            
    interest for 1st month = 709.15(.257)/12 = 15.19
balance at end of 1st month = 709.15 + 15.19 - 350
= 374.34
interest for 2nd month = 374.34(.257)/12 = 8.02
balance at end of 2nd month = 374.34 + 8.02 - 350
= 32.35
interest for 3rd month = 32.35(.257)/12 = .69
amount due = 32.35 + .69
= 33.04
** So the total she paid for her $709.15 TV was
350+350+3304 = $733.04
her interest paid = 733.04 - 709.15 = $23.89
the calculation shown as ** is actually not valid even though it is done all the time. We cannot add up amounts of money that are not at the same "time spot".
e.g. If I deposit $500 now and another $500 two years from now , I will not have $1000 two years from now, unless I totally disregard any interest rate.
 
    
balance at end of 1st month = 709.15 + 15.19 - 350
= 374.34
interest for 2nd month = 374.34(.257)/12 = 8.02
balance at end of 2nd month = 374.34 + 8.02 - 350
= 32.35
interest for 3rd month = 32.35(.257)/12 = .69
amount due = 32.35 + .69
= 33.04
** So the total she paid for her $709.15 TV was
350+350+3304 = $733.04
her interest paid = 733.04 - 709.15 = $23.89
the calculation shown as ** is actually not valid even though it is done all the time. We cannot add up amounts of money that are not at the same "time spot".
e.g. If I deposit $500 now and another $500 two years from now , I will not have $1000 two years from now, unless I totally disregard any interest rate.
                    Answered by
            Steve
            
    Thank you so much for the explanation.
    
                    Answered by
            Tony Dinozzo
            
    not sure what the exact answer is here you should have stated the answer clearly
    
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