Question

Frank has four different credit cards, the balances and interest information of which are outlined in the table below. He would like to consolidate his credit cards to a single credit card with an APR of 18% and pay off the balance in 24 months. What will his monthly credit card payment be?

Credit Card
Balance
APR
A
$2,380
19%
B
$4,500
15%
C
$1,580
17.50%
D
$900
21%
a.
$390.00
b.
$462.91
c.
$467.29
d.
$52.00

Answer 1

Total balance = 2380 + 4500 + 1580 + 900 = $9,360.
Monthly rate r = 0.18/12 = 0.015, n = 24.

Monthly payment = P * r / (1 - (1+r)^-n)
= 9360 * 0.015 / (1 - 1.015^-24) ≈ $467.29.

Answer: c.