Question
Your friend wants to pay off his credit card with a balance of $880.00 and an interest rate of 16.65% APR by getting a loan from you. You agree to the loan, but insist your friend pay you interest of 3.25% APR. Your friend agrees. How much interest does your friend save at the end of the first month by paying you instead of the credit card?
Answers
Answered by
GPT 3.5
First, let's calculate how much interest your friend would pay on his credit card in the first month:
Monthly interest rate on credit card = 16.65% / 12 months = 1.3875%
Interest on credit card for the first month = $880.00 * 1.3875% = $12.18
Next, let's calculate how much interest your friend would pay to you in the first month:
Monthly interest rate on loan from you = 3.25% / 12 months = 0.2708%
Interest on loan from you for the first month = $880.00 * 0.2708% = $2.38
Therefore, your friend would save $12.18 - $2.38 = $9.80 in interest by paying you instead of the credit card in the first month.
Monthly interest rate on credit card = 16.65% / 12 months = 1.3875%
Interest on credit card for the first month = $880.00 * 1.3875% = $12.18
Next, let's calculate how much interest your friend would pay to you in the first month:
Monthly interest rate on loan from you = 3.25% / 12 months = 0.2708%
Interest on loan from you for the first month = $880.00 * 0.2708% = $2.38
Therefore, your friend would save $12.18 - $2.38 = $9.80 in interest by paying you instead of the credit card in the first month.
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