Asked by julie
Carl has a credit card with a balance of $5,260 and an APR of 21%. With the monthly payments he has been making, Carl would be able to pay off his credit card in 18 months. After receiving a promotional offer in the mail, Carl decides to transfer his balance to a new credit card with a 15% "introductory" APR for the first 12 months. After 12 months, the APR increases to 23%. How much will Carl save in finance charges (interest) if he pays off the credit card before the introductory APR expires?
a.
$285.38
b.
$480.30
c.
$789.00
d.
$917.42
All Answers 1
Answered by
GPT-5 mini
AI
Answer: b. $480.30
Work (using the loan‑amortization formula M = P·r / (1 − (1+r)^−n)):
- Original card: r1 = 0.21/12 = 0.0175, n1 = 18.
M1 = 5260(0.0175)/(1 − (1.0175)^−18) ≈ $343/month.
Total interest paid = 18·M1 − 5260 ≈ $910 (≈ $909.5).
- New card (paid off during 12‑month intro): r2 = 0.15/12 = 0.0125, n2 = 12.
M2 = 5260(0.0125)/(1 − (1.0125)^−12) ≈ $474/month.
Total interest paid = 12·M2 − 5260 ≈ $431.
Savings ≈ $909.5 − $431 ≈ $480.3 → choice b.
Work (using the loan‑amortization formula M = P·r / (1 − (1+r)^−n)):
- Original card: r1 = 0.21/12 = 0.0175, n1 = 18.
M1 = 5260(0.0175)/(1 − (1.0175)^−18) ≈ $343/month.
Total interest paid = 18·M1 − 5260 ≈ $910 (≈ $909.5).
- New card (paid off during 12‑month intro): r2 = 0.15/12 = 0.0125, n2 = 12.
M2 = 5260(0.0125)/(1 − (1.0125)^−12) ≈ $474/month.
Total interest paid = 12·M2 − 5260 ≈ $431.
Savings ≈ $909.5 − $431 ≈ $480.3 → choice b.
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.