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Newton uses a credit card with a 18.6% APR, compounded monthly, to pay for a cruise totaling $1,920.96. He can pay $720 per month on the card. What will the total cost of this purchase be?

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W0lf93
It will take about 3 months to payoff the entire card. $56.01 of total interest will be paid. The total cost of the purchase will then be the initial cost with the interest paid added on. 1976.97 will be the total cost.
sqdancefan

Answer:

$1947.32

Explanation:

Most credit cards allow the balance to be paid in the first month without any finance charge. After Newton's first payment of $720 the remaining balance of $1200.96 will earn interest of 1.55% for the month, resulting in a new balance of 1219.57.

Following the second month's payment of $720, Newton's balance of $499.57 will earn 1.55% interest to become a new balance of $507.32. Newton can pay that off in the 3rd month.

Newton's total of payments is ...

... $720 +720 +507.32 = $1947.32

_____

This amount includes $26.36 in interest charges.

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