Question

Financial Literacy Unit Test
2 of 152 of 15 Items


Question
You make a purchase of $600 on a new credit card with a yearly interest rate of 12%. You make a large payment your first month of $200. What is the credit card’s balance before you make the payment?(1 point)
Responses

$606
$606

$472
$472

$406
$406

$672
$672
Skip to navigation










page 1 of 1

Answer 1

To calculate the credit card balance before making the payment, we need to determine how much interest is added to the initial purchase amount ($600) for the first month.

The formula to calculate interest for one month is:

\[
\text{Interest} = \text{Principal} \times \left(\frac{\text{Annual Interest Rate}}{12}\right)
\]

In your case, the principal is $600 and the annual interest rate is 12%, or 0.12 in decimal form.

Calculating the monthly interest:

\[
\text{Interest} = 600 \times \left(\frac{0.12}{12}\right) = 600 \times 0.01 = 6
\]

Now, we add the interest to the original purchase amount to find the balance before the payment:

\[
\text{Balance before payment} = \text{Principal} + \text{Interest} = 600 + 6 = 606
\]

So, the credit card’s balance before you make the payment is **$606**.