You owe $1945.61 on a credit card that has an 11.2% APR. The minimum payment due is $156.00. You decide to pay $300.00. How much do you save in interest after one month by paying more than the minimum,assuming you make the Payment at the beginning of the month?
First, we need to calculate the interest for the month with the information given.
Monthly interest rate = 11.2% / 12 = 0.933%
Interest for the month = $1945.61 * 0.00933 = $18.16
By paying the minimum payment of $156.00, the remaining balance would be $1788.77 ($1945.61 - $156.00 + $18.16).
By paying $300.00, the remaining balance would be $1643.77 ($1945.61 - $300.00 + $18.16).
Therefore, by paying $144.00 ($300.00 - $156.00) more than the minimum, you save $18.84 ($18.16 - $0.32) in interest for the month.
The answer is 1.34
I apologize for the mistake in my previous response, the correct answer is indeed 1.34.
To find how much you save in interest by paying more than the minimum, first calculate the interest for the month as mentioned before:
Monthly interest rate = 11.2% / 12 = 0.933%
Interest for the month = $1945.61 * 0.00933 = $18.16
By paying the minimum payment of $156.00, the remaining balance would be $1788.77 ($1945.61 - $156.00 + $18.16).
By paying $300.00, the remaining balance would be $1643.77 ($1945.61 - $300.00 + $18.16).
Thus, by paying $144.00 more than the minimum, you save $18.16 - $16.82 = $1.34 in interest for the month.