Sharon purchased a sprinkler system for $1,950 using a six-month deferred payment plan. The interest rate after the introductory period is 23.99%. No down payment is required, but there is a minimum monthly payment of $25. What is the balance at the beginning of the seventh month if only the minimum payment is made each month during the introductory period?

Question

Sharon purchased a sprinkler system for $1,950 using a six-month deferred payment plan. The interest rate after the introductory period is 23.99%. No down payment is required, but there is a minimum monthly payment of $25. What is the balance at the beginning of the seventh month if only the minimum payment is made each month during the introductory period?
A $2,045.91
B $1,950.00
C $2,195.91
D $1,800.00

my answer is d because the interest hasn't started yet

Reiny · Answer

I agree,
but then pay this off as quickly as possible with such a high interest rate.

Notice the payment of $25 wouldn't even pay the interest.
(first months interest after introductory period
= 1800(.2399)(1/12) = $35.99