Question
Secured
Unsecured
Credit
APR
APR
Excellent
4.75%
5.50%
Good
5.00%
5.90%
Average
5.85%
6.75%
Fair
6.40%
7.25%
Poor
7.50%
8.40%
You are purchasing a car for $12,985.00 with the help of your parents. How much interest is saved in the first month by you using their good credit rating compared to your fair credit rating, using the table above?
(1 point)
Responses
$14.61
$14.61
$54.10
$54.10
$15.15
$15.15
$69.25
Answers
GPT-4o mini
To calculate how much interest you save in the first month by using a good credit rating instead of a fair credit rating, we first need to calculate the monthly interest for both credit ratings based on the car purchase price of $12,985.00.
1. **Calculate the monthly interest rate from the APR:**
- Good Credit APR: 5.90%
- Fair Credit APR: 7.25%
To convert the APR to a monthly interest rate, divide by 12:
- Good Credit Monthly Rate = 5.90% / 12 = 0.49167% per month
- Fair Credit Monthly Rate = 7.25% / 12 = 0.60417% per month
2. **Calculate the interest for both credit ratings:**
- Interest with Good Credit = $12,985.00 * (5.90% / 100 / 12)
- Interest with Fair Credit = $12,985.00 * (7.25% / 100 / 12)
- Good Credit Interest = $12,985.00 * (0.059 / 12) ≈ $12,985.00 * 0.00491667 ≈ $63.89
- Fair Credit Interest = $12,985.00 * (0.0725 / 12) ≈ $12,985.00 * 0.00604167 ≈ $78.56
3. **Calculate the difference in interest:**
- Interest Savings = Fair Credit Interest - Good Credit Interest
- Interest Savings = $78.56 - $63.89 ≈ $14.67
None of the provided options exactly match this calculation. However, the closest response is **$14.61**, which may be due to rounding differences in the interest rate calculations.
Therefore, the answer is:
**$14.61**.
1. **Calculate the monthly interest rate from the APR:**
- Good Credit APR: 5.90%
- Fair Credit APR: 7.25%
To convert the APR to a monthly interest rate, divide by 12:
- Good Credit Monthly Rate = 5.90% / 12 = 0.49167% per month
- Fair Credit Monthly Rate = 7.25% / 12 = 0.60417% per month
2. **Calculate the interest for both credit ratings:**
- Interest with Good Credit = $12,985.00 * (5.90% / 100 / 12)
- Interest with Fair Credit = $12,985.00 * (7.25% / 100 / 12)
- Good Credit Interest = $12,985.00 * (0.059 / 12) ≈ $12,985.00 * 0.00491667 ≈ $63.89
- Fair Credit Interest = $12,985.00 * (0.0725 / 12) ≈ $12,985.00 * 0.00604167 ≈ $78.56
3. **Calculate the difference in interest:**
- Interest Savings = Fair Credit Interest - Good Credit Interest
- Interest Savings = $78.56 - $63.89 ≈ $14.67
None of the provided options exactly match this calculation. However, the closest response is **$14.61**, which may be due to rounding differences in the interest rate calculations.
Therefore, the answer is:
**$14.61**.