Math 1050 Credit Card Debt Assignment

you have received your monthly credit card statement and must now deal with the financial realities of last month's
in credit card
birthday celebration. while your milestone in years was deserving of a celebration, dealing with the Srg0o
charges will require some planning.

your credit card statement lists the ApR (Annual Percentage Rate) for your balance to be 13'5%. This is the yearly
cornpany
interest rate the credit card company uses in calculating interest due on your balance. The credit card
compounds interest monthly. Your monthly interest rate on credit card charges will be:

. APR 0.135
,=ff=;=0.01125
The minimum payment required by your credit card company is 525/month. Assuming that you do not make any new
charges to your account, answer the following questions to help you determine the best plan for paying off this credit
card debt.

1. To begin with, let s check out the plan of only paying the minimum amount due each month- To get a feelfor how
this will affect the balance, finish filling in the following table using the minimum monthly payment of S25.

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4,05
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arl 4
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What is the total amount that has been paid to the credit card company at the end of the first year?

fu**"oo
How much of the original balance has been paid off at the end of the first year?

fi'l'1 '?l
From looking at the new balances over the first year, how many years do you think it will take to pay off the 51900?
(This is a guess so there is no wrong answer. Before going on to step 2, write down your best estimate.)

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 Math 1050 Credit Card Debt Assignment

2. A formula for calculating the payme nt, P ,required to pay off a debt of amount Din M months with monthly

interest rate i is
D.i
'- t-(t+;)-"
p--

Using this formula, solve foril

to determine the number gf months it willtake to pay off the 51900 credit card debt

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this
with minimum monthly payments of S25. Round the number of months to two decimal places. tAttach all work for

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Howtongisthisinyears,rounde{to*lbeosgq:,tenthof ayear? ffin, tt,r;'iT,", r,tl,r<too1

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What is the total amount paid to the credit card company, rounded to the nearest dollar?

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3. How many months will be required to pay off the debt if you pay SS0 month? Round to two decimal places.
SSO each month?

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f"-= -
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How long is this in years, rounded to the nea_rest tenth of a year?

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What is the total amount paid toiire credit card company, rounded to the nearest dollar?

4. How many months will be required to pay off the debt if you pay 5ZS each month? Round to two decimal places.

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0 !,oll,Lg'A = ,ott2b't
How long is this in oraYear?
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NW, ffi"tenth ( r,
What is the total amount o the credit card company, rounded to the nearest dollar?

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Math 1050 Credit Card Debt Assignment

5. How large would your monthly payment have to be in order to pay off your debt in l-2 months?
Round g! to the next
nearest cent.

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What is the total amount paid to the credit card company, rounded to the nearest dollar?
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5. What is the best plan for paying off the 52000? Why?

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what is the worst plan? why?

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What should you do if you cannot afford to make the payments required by the best plan?

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7. What are two things that the average consumer can learn by completing this assignment?

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