Question

Your credit card has a balance of ​$4700 and an annual interest rate of 17​%. With no further purchases charged to the card and the balance being paid off over four ​years, the monthly payment is ​$136​, and the total interest paid is ​$1828. You can get a bank loan at 9.5​% with a term of five years. Complete parts ​(a) and ​(b) below.

a. How much will you pay each​ month? How does this compare with the​ credit-card payment each​ month? Select the correct choice below and fill in the answer boxes to complete your choice. ​(Do not round until the final answer. Then round to the nearest dollar as​ needed.)

A. The monthly payments for the bank loan are approximately ​$___ nothing. This is ​$ ____nothing more than the monthly​ credit-card payments

B. The monthly payments for the bank loan are approximately ​$ _____nothing. This is ​$ _____nothing less than the monthly​ credit-card payments

Answer 1

Credit card Balance = $ 4700

Monthly payment at 17% annual interest rate and paid in 4 years = $ 136

You can get the bank loan at 9.5% with terms of 5 years.

Calculating the Monthly payment of the new term loan:-

where, P = Loan amount = $ 4700

r = Periodic Interest rate = 9.5%/12 = 0.791666%

n= no of periods= 5years*12months = 60

Monthly payment = $ 99

So, amount you pay each month is $ 99

B. The monthly payments for the bank loan are approximately ​$ 99. This is ​$ 37 ($136-$99) less than the monthly​ credit-card payments