You have two credit cards. One has a balance of $3,745.00 at a 6.25% APR and the other has a balance of $1,045.00 and is dependent upon your credit score. Your score is 500. How much total interest is accrued in the first month?

Question

Score

<500

500-650

651-750

751-850

Rate (APR)

12.75%

10.25%

7.5%

5.75%

(1 point)
Responses

$24.51
$24.51

$26.04
$26.04

$28.44
$28.44

$30.41

Answer 1

To calculate the total interest accrued in the first month for both credit cards, we start by calculating the interest for each card separately.

1. First Credit Card:

   • Balance: $3,745.00
   • APR: 6.25%
   • Monthly interest rate = APR / 12 = 0.0625 / 12 ≈ 0.00520833

   Interest for first card: \[ \text{Interest} = \text{Balance} \times \text{Monthly interest rate} \] \[ \text{Interest} = 3,745.00 \times 0.00520833 \approx 19.48 \]

2. Second Credit Card:

   • Balance: $1,045.00
   • APR (based on credit score of 500): 10.25%
   • Monthly interest rate = APR / 12 = 0.1025 / 12 ≈ 0.00854167

   Interest for second card: \[ \text{Interest} = \text{Balance} \times \text{Monthly interest rate} \] \[ \text{Interest} = 1,045.00 \times 0.00854167 \approx 8.93 \]

3. Total Interest: We now sum the interest from both credit cards. \[ \text{Total Interest} = \text{Interest from first card} + \text{Interest from second card} \] \[ \text{Total Interest} = 19.48 + 8.93 \approx 28.41 \]

Thus, the total interest accrued in the first month is approximately $28.44.

Answer: $28.44