Question

Patti took a cash transaction of $1500 her new credit card charges an annual percentage rate of 21% transaction fee for Cash advance is 3% of the cash advance with a maximum fee of $35 this fee is added to the total cash advance in accrues interest if Patty makes monthly payments of $65 how long will it take Patty to pay for the cash advance

how much does it really cost? (continu Marie just used her new credit card to buy a bike for $400. Her budget allows her to pay no more $25 each month on her credit card. Mario has decided not to use the credit card again until the bll paid off. The credit card she used has an Annual Percentage Rate of 21%. OUD If Marle pays $25 each month on her credit card: 13. How long will it take Marie to pay for the bike? 14. What is the total amount Marie will end up paying for the bike? 15. How much interest will Marie pay for using her credit card to buy the bike?

Answer 1

Question 1) Patty took a cash advance of $1,500. Her new credit card charges an Annual Percentage Rate of 21%. The transaction fee for cash advances is 3% of the cash advance, with a maximum fee of $35. This fee is added
to the total cash advance, and accrues interest.
If Patty makes monthly payments of $65:

a) How long will it take Patty to pay for the cash advance?

b) What is the total amount Patty will end up paying for the cash advance?

c) What is the total finance charge Patty will pay?

Solution 1) a) Transaction Fees = 3% * 1500 = 45

Since, maximum fee that can be charged is 35, so, $35 is charged as transaction fees.

Total advances = 1500 + 35 = $1,535

Monthly Payment = $65

Annual Percentage Rate = 21%

Monthly Percentage Rate = 21%/12 = 1.75%

Using NPER function in Excel, the number of periods is calculated as:= Nper(monthly rate, monthly payment, present value of loan, future value, type)

= Nper(1.75%,-65,1535,0,0) = 30.73 months = 31 months

Solution 1) b) Total amount Patty will end up paying for the cash advance = Number of Payments*Amount of 1 payment

= 30.73*65 = $1,997.70

Solution 1) c) Total finance charge paid by Patty = Total amount paid - Total cash advances

= 1997.70 - 1535 = $462.70

Question 2) Marie just used her new credit card to buy a bike for $400. Her budget allows her to pay no more than
$25 each month on her credit card. Marie has decided not to use the credit card again until the bike is paid off. The credit card she used has an Annual Percentage Rate of 21%.

a) How long will it take Marie to pay for the bike?

b) What is the total amount Marie will end up paying for the bike?

c) How much interest will Marie pay for using her credit card to buy the bike?

Solution 2) a)

Total advances = $400

Monthly Payment = $25

Annual Percentage Rate = 21%

Monthly Percentage Rate = 21%/12 = 1.75%

Using NPER function in Excel, the number of periods is calculated as:= Nper(monthly rate, monthly payment, present value of loan, future value, type)

= Nper(1.75%,-25,400,0,0) = 18.94 months = 19 months

Solution 2) b) Total amount Marie will end up paying for the bike = Monthly Payment*Nummber of payment months

= 25*18.94 = $473.39

Solution 2) c) Total interest Marie will pay for using her credit card to buy the bike = Total amount paid - Total loan taken

= 473.39 - 400 = $73.39