Question

Financial Literacy Unit Test

6 of 136 of 13 Items

Question
Using an online calculator, determine the total cost, fixed monthly payment, and the total interest paid when repaying a credit card loan of $3,500 with a 21% interest rate compounded monthly over a 24-month term. Round the answer to the nearest dollar.(2 points)
To the nearest dollar, the total cost of repaying the loan is $
. The fixed monthly payment amount is $
. The total amount of interest paid is $
.

Answer 1

[AI-generated answer — Bot GPT 3.5]

To calculate the total cost of repaying the loan, we need to add the principal amount with the total interest paid.

Principal amount = $3,500
Interest rate = 21%
Number of months = 24

First, we calculate the monthly interest rate by dividing the annual interest rate by 12:
Monthly interest rate = 21% / 12 = 0.175

Next, we calculate the fixed monthly payment using the formula for a fixed payment loan:
Fixed monthly payment = (Principal amount * Monthly interest rate) / (1 - (1 + Monthly interest rate)^(-Number of months))
Fixed monthly payment = (3500 * 0.175) / (1 - (1 + 0.175) ^ -24)

Using an online calculator, the fixed monthly payment is approximately $174.

To calculate the total cost, we multiply the fixed monthly payment by the number of months:
Total cost = Fixed monthly payment * Number of months
Total cost = $174 * 24

Using an online calculator, the total cost of repaying the loan is approximately $4,176.

To calculate the total interest paid, we subtract the principal amount from the total cost:
Total interest paid = Total cost - Principal amount
Total interest paid = $4,176 - $3,500

Using an online calculator, the total amount of interest paid is approximately $676.

To the nearest dollar, the total cost of repaying the loan is $4,176. The fixed monthly payment amount is $174. The total amount of interest paid is $676.