Card Name (APR %) Existing Balance Credit Limit MarK2 (8.2%) $1,692.45 $3,000.00
ID: 2421707 • Letter: C
Question
Card Name (APR %)
Existing Balance
Credit Limit
MarK2 (8.2%)
$1,692.45
$3,000.00
Bee4 (10.5%)
$2,138.90
$2,500.00
You have $400.00 each month to payoff these 2 credit cards. You decide to pay only the interest on the lowest interest card and the remaining amount to the other card.
How long does it take to pay off the higher interest card?
What is the amount of the last payment? Why?
What is the balance of the lowest interest card when the higher interest card is paid off? Why?
Rework the problem so that you pay off the lower-interest card first. How much money do you save by paying off the higher-interest card first?
Be sure to include in your response:
All parts of the table are complete and calculations correct
The answers to the additional questions above
Higher Interest Card (Payoff Option)
Month
1
2
3
4
5
6
7
8
9
10
Principal
Interest accrued
Payment (on due date)
End-of-month balance
Lower Interest Card (Payoff Option)
Month
1
2
3
4
5
6
7
8
9
10
Principal
Interest accrued
Payment (on due date)
End-of-month balance
Card Name (APR %)
Existing Balance
Credit Limit
MarK2 (8.2%)
$1,692.45
$3,000.00
Bee4 (10.5%)
$2,138.90
$2,500.00
Explanation / Answer
Higher Interest Card (Payoff Option) Month 1 2 3 4 5 6 7 8 9 10 Principal 2138.9 1,769.18 1,396.23 1,020.01 640.50 257.67 Interest accrued 18.72 15.48 12.22 8.93 5.60 2.25 Payment (on due date) 388.43 388.43 388.43 388.43 388.43 259.92 End-of-month balance 1,769.18 1,396.23 1,020.01 640.50 257.67 - Lower Interest Card (Payoff Option) Month 1 2 3 4 5 6 7 8 9 10 Principal 1692.45 1692.45 1692.45 1692.45 1692.45 1692.45 1563.937 1,174.62 782.65 388.00 Interest accrued 11.57 11.57 11.57 11.57 11.57 11.57 10.69 8.03 5.35 2.65 Payment (on due date) 11.57 11.57 11.57 11.57 11.57 140.08 400 400 400 390.65 End-of-month balance 1692.45 1692.45 1692.45 1692.45 1692.45 1,563.94 1,174.62 782.65 388.00 - Answer 1. 6 Months - Time taken to pay higher interest card Answer 2. $390.65 is the last payment. They paid 400 each month until the amount due was lower than 400. Answer 3. Balance of Lowest Interest Card when the highest interest card is Paid off = $1563.94 Answer 4. Higher Interest Card (Payoff Option) Month 1 2 3 4 5 6 7 8 9 10 11 Principal 2138.9 2,138.90 2,138.90 2,138.90 2,138.90 1,957.34 1,574.46 1,188.24 798.64 405.62 9.17 Interest accrued 18.72 18.72 18.72 18.72 18.72 17.13 13.78 10.40 6.99 3.55 0.08 Payment (on due date) 18.72 18.72 18.72 18.72 200.28 400.00 400.00 400.00 400.00 400.00 9.25 End-of-month balance 2,138.90 2,138.90 2,138.90 2,138.90 1,957.34 1,574.46 1,188.24 798.64 405.62 9.17 - Lower Interest Card (Payoff Option) Month 1 2 3 4 5 6 7 8 9 10 Principal 1692.45 1,322.74 950.50 575.72 198.37 Interest accrued 11.57 9.04 6.50 3.93 1.36 Payment (on due date) 381.28 381.28 381.28 381.28 199.72 End-of-month balance 1,322.74 950.50 575.72 198.37 - Calculation of Money Saved Total Amount paid when Highest Interest Card is Paid First Mark2 2,202.10 Bee4 1,788.55 3,990.65 Total Amount paid when Lowest Interest Card is Paid Mark2 2,284.41 Bee4 1,724.84 4,009.25 Money Saved 18.60