Q:

How much interest will you have to pay for a credit card balance of $1,034 that is 1 month overdue, if a 17% annual rate is charged? You will have to pay $1224.43| in interest. (Round to two decimal places.)

Accepted Solution

A:
Ans. Since the annual rate is not compunded (for example, compounded monthly) you will have to pay in interest $27.41, and the total payment is $1,061.41Step-by-step explanation:Hi, since the balance is 1 month overdue, it means that you owe 2 months of interest to this obligation, but before we start finding the interest of your credit card, first let´s find the effective monthly equivalent rate for that 17% annual interest rate.The formula is as follows.ThereforeSo your monthly interest rate is 1.317%. Now let´s find the amount of interests that you have to pay for 2 months. This is the formula.Where "n" is the period of time in months that you owe to the financial institution. The result of that is:This way, interest are = $27.41 and the total amount that you will have to pay is:Payment=Present Value+Interest=1,034+27.41=1,061.41