Question

As a New Year's resolution, Jimmy has agreed to pay off his 4 credit cards and completely eliminate his credit card debt within the next 12 months. Listed below are the balances and annual percentage rates for Jimmy's credit cards. In order to pay his credit card debt off in the next 12 months, what will Jimmy's total minimum credit card payment be?



Credit Card
Current Balance
APR
A
$563.00
16%
B
$2,525.00
21%
C
$972.00
19%
D
$389.00
17%

a.
$321.83
b.
$361.45
c.
$374.65
d.
$411.25

Answer 1

We need the monthly payment for each card that will amortize the balance in 12 months. For a balance B, monthly rate r = APR/12, and n = 12 months, the monthly payment is

P = B * [r / (1 - (1 + r)^(-n))].

Compute each card:

- A: B = 563, r = 0.16/12 = 0.0133333 → P ≈ $51.06
- B: B = 2525, r = 0.21/12 = 0.0175 → P ≈ $234.64
- C: B = 972, r = 0.19/12 = 0.0158333 → P ≈ $89.44
- D: B = 389, r = 0.17/12 = 0.0141667 → P ≈ $35.54

Total monthly payment ≈ 51.06 + 234.64 + 89.44 + 35.54 ≈ $411.25.

Answer: d. $411.25