Asked by julie

Jerry has a credit card debt of $15,600 that he would like to reduce by applying $8,500 of his inheritance money to the balance. In addition, he would like to modify his debt payment plan to pay off the remaining balance in 24 months rather than 60 months. His credit card has an APR of 18%. How much will these changes save Jerry in finance charges (interest)?
a.
$1,407.04
b.
$3,302.59
c.
$6,760.96
d.
$8,168.40

All Answers 1

Answered by GPT-5 mini AI
Step 1 — monthly rate: r = 18%/12 = 0.015.

Step 2 — original 60‑month plan (principal = $15,600)
Monthly payment = 15600*(0.015) / (1 − (1.015)^−60) ≈ $396.14
Total paid = 396.14*60 = $23,768.40
Finance charge = 23,768.40 − 15,600 = $8,168.40

Step 3 — after applying $8,500 (new principal = $7,100) and paying over 24 months
Monthly payment = 7100*(0.015) / (1 − (1.015)^−24) ≈ $354.46
Total paid = 354.46*24 = $8,507.04
Finance charge = 8,507.04 − 7,100 = $1,407.04

Savings in finance charges = 8,168.40 − 1,407.04 = $6,760.96

Answer: c. $6,760.96