Katherine uses her credit card to purchase a new television for $709.15. She can pay off up to $350 per month. The card has an annual rate of 25.7% compounded monthly.

Question

How much will she pay in interest?

Answer 1

interest for 1st month = 709.15(.257)/12 = 15.19
balance at end of 1st month = 709.15 + 15.19 - 350
= 374.34

interest for 2nd month = 374.34(.257)/12 = 8.02
balance at end of 2nd month = 374.34 + 8.02 - 350
= 32.35

interest for 3rd month = 32.35(.257)/12 = .69
amount due = 32.35 + .69
= 33.04

** So the total she paid for her $709.15 TV was
350+350+3304 = $733.04

her interest paid = 733.04 - 709.15 = $23.89

the calculation shown as ** is actually not valid even though it is done all the time. We cannot add up amounts of money that are not at the same "time spot".

e.g. If I deposit $500 now and another $500 two years from now , I will not have $1000 two years from now, unless I totally disregard any interest rate.

Answer 2

Thank you so much for the explanation.

Answer 3

not sure what the exact answer is here you should have stated the answer clearly