Question

10. Joey found out that he shopped at Aggieland Outfitters so much that he racked up $6,000 in debt. If he can pay $100 each month and the card charges 23 percent APR (compounded monthly), he can pay off the debt (assuming no more charges): True or false?

Group of answer choices

A. True

B. False

Answer 1

The answer is FALSE

The Amount of debt is $6,000 and the APR is 23%. So, the monthly rate shall be 1.92% nearly in the first month. It woukd be $115 in interest in first month itself. The payment is only $100 every months and thus not adequate to repay interest portion also.

So, next month will start with 6,150 debt. So, the interest also will increase in proportion. So, it would never come under $100. And he cannot repay the debt in full with this payment of $100 a month.