Math 1050 Credit Card Debt Assignment

Name K OI t .., l een RI u;

You have received your monthly credit card statement and must now deal with the financial realities of last month' s
birthday celebration. While your milestone in years was deserving of a celebration, dealing with the $1900 in credit card
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
interest rate the credit card company uses in calculating interest due on your balance. The credit card company
compounds interest monthly. Your monthly interest rate on credit card charges will be:

i = APR = 0.135 z 0.01125

12 12

The minimum payment required by your credit card company is $25/month. Assuming that you do not make any new
charges to your account, answer the following questions to help you determine ~he 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 feel for how
this will affect the balance, finish filling in the following table using the minimum mont hly payment\of $25.

Month Old Balance Interest Payment New Balance

1 $1900.00 $21.38 $25.00 $1896.38
2 $1896.38 $ 2.\. :-?J~ .$2~ -00 $ lf>q 2.·c,q
3 $ 1s q , .1pq $ 2-1· 2.q ~ 2 ~ -00 ~1> ltif> t , '1 S
4 $ I'b"b~ · ft'o $ 2-1· 2.C:7 $ 2.S.oo 1.. ''bf3 !? , 1- ?J
5 t l'o'o'o, '2o t, 2-1 · ·-2-1 $ 2S-oo !12 H~'c'I. '1 "I
6 $ 1SS\. "f't $ 1-1- 11 1-6.DO ~ 1'111 1·"'
7 $ 1Sl1 • ut $ 2. t.12. • t> 2 '? -00 $ l'bl?r 1.3
8 $ IS1 8- 1?> t:, 2.1- ·.or !b 25.oo 4 lfJri4 ,-r I
9 $ l'l,fb'f. J I '\; 2-'· <Pi $ '2.G -oO $ l'b ii15 · 8',S
10 -$ \'ob S. '6S :11 2.0· q Cf $ 2.'o-0O ,t l~<p l· ~'i
11 i,~(oJ.~'1 !1> 10 -ft 0 t. 21o . oo 4' l~o q .1 q
12 4 I 8'2>1J-1 Cf ~ l O·'"H , ~ 2~ -00 $ ,e,s ~-10
4 1.07>·11- ¾,?JOl>
What is the total amoun~en paid to the credit card company at the end of the first year?
26 ·\1 - : ; - \ ~

How much of the original balance has been paid off at the end of the first year?

\ q oO- \ ~ 5 ?J.1 0 ::. tf'i;.~

From looking at the new balances over the first year, how many years do you think it wili take to pay off the $1900?
(This is a guess so there is no wrong answer. Before going on to step 2, write down your best estimate.}

e1t"ov1nd 1w ~ears ·
Math 1050 Credit Card Debt Assignment
Name _ _ _ _ ~
2 - A formula for calculating the payment, P, required to pay off a debt of amount Din M months wi th monthI Y
interest rate i is
P=--D_·_i_
1-(• +irM

Using this formula, solve for M to determine the number of months it will take to pay off the $1900 credit card debt
with minimum monthly payments of $25. Round the number of months to two decimal places. (Attach all work for this
assignment to the end.) \'(\ I• 0 111 S -M -:: \~ , 1"1 e>
2ss ~ 11.too .oo,c. 0.011 16 - In (o -,~ c;,)
)?l,f +a.O1 n 0)- vi n'\ ::. 1v1 ( 1, 0., n.0 ) -;::: 1
2':> -l '!, ( P- DIIJGfM "' 21.1,1~ rn1 11-:i:-<PI rr11rYrt11J /
How long is this in years, rounded to the nearest tenth of a year?
ITJ - t,I
"Ti. ~ r
Pt-?,'b ;::. l'l-1 ~tt1rJ /
What is the total amount paid to the credit card company, rounded to the nearest dollar?
ll 1.. lo I " 1.5 ·.::.O~D_:.-:::...-- - -,
· 1tii1s.25 I
3. How many r:nonths will be required to pay off the debt if you pay $~0 each month? 'Round to two decimal places.
:c;o::-- -1{.fOO )f 0·0112.~ ,~1-01110 - M =- f1, 0ll1.0 - Ljq.g,,9'11
)< 1-(1to,01120)-~ m :: ~- lr_l (o.~2.~ -::::
1
lrt ( I• OI 1'J.'?). · ~

How long is this in years, rounded to the nearest tenth of a year?

Lii;-~~ 'f. 100 ~ \Lf· 2- ~{JCti vs 1

What is the total amount paid to the credit card company, rounded to the nearest dollar?
yq . g-ep · SO -== 2'1Cf3
l
4. How many months will be reguired to pay off the debt if you P.ay $7~ach month? Round to two decimal places.
7e, -=. IO!tO • O•Oll1,<;1 '""1•0111.;-l'VI -= l,Oll1 0 -i'1 •qg1'l7
tL (Ir O•Olf1,~)-1VJ = -.. .
· m _- -:- ln{0_0 1c;l
h'' l ,.0111.0 ) , If
1s-10,. oIn 0 , l'v1 :: 2-1 .'?10 m :::- j;......
2-=- q-. q_liJ_ m
_ o_n_m_ J-,f
How long is this in years, rounded to the nearest tenth of a year?
2
~ " -z ·\ l ·lo ~v-,r5 I
What is the total amount paid to the credit card company, rounded to the nearest dollar?
1,4.qq, 76 :::0 ~11,yq .1.0
\t11.11 q\
 Math 1050 Credit Card Debt Assignment
Name
- - - -- - - - - - -
5 · How large would your monthly payment have to be in order to pay off your debt in 12 months? Round YR to the next
nearest cent.

P-- l'-100 · 0·01110

= ,~
'f 110· 15 /
1-( It 0-01 120) ·n

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

. ~ \7 0·\0. ,2- = $20'-i, - 80 ~ f ~20 '-i2. J

6. What is the best plan for paying off the $1900? Why?
patji n g off r:ne $I _Cf ~~ ,s ~st tu pet~ off w1rn1n 1:2. morifl1J
P-e CctlA~ nu 1·nf.l/re1t t'ts \qr~ tt-u 1m F ,r r~
ia .s ,o
pC1!1 otf tlu .$1<i100 -

What is the worst plan? Why? +,/1 q--w K 1.,1,0 IA

p014 cn0 tyU monrnl 'J m 1nftY1 111 m p<,Hj rYU1-1i- 0 1r vv I
a
lN I II elYl d 1,1 p p li\ vyi n ~ 111 rU ti m,,( s \IV h Pl / t° v1 0 r, or·y, Pl. I I J p ~ I of.

What should you do if you cannot afford to make the payments required by the best plan?
at 1ec.Ht rry tu t:><i1 '1 do IA~ u tu tti pl.t tvu 01 rn own t of . t""1u
m Oh tn I vi f 011}'t'\.kn f Yh 61 t w VIJ ~ 0 l/1 of D n 't YI ~Ve to ~ pf ~
t'\'lL,t(/h
V\Ad ~ r
rf)o~ OYI
b-etrnh d o-n 't ~ d
iYl~n.
YY1 trY'l' rn II h r vt vA h Of fford.

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

r. J?, Ud ~ t t:>-ettM-, dOn't ~ d m IY'f h1 Pl h r U v()I n II f-foY d-