Credit Card Lab

4/3/22, 5:48 PM Lumen OHM
Credit Card lab 2.0 Shannon Hawkes
Question 1 29/29 pts 94-99
https://ohm.lumenlearning.com/assess2/?cid=59055&aid=4293859#/print 1/9
Warning! You must answer all of the questions in order for the lab to function properly. You
can submit answers one at a time (or multiple at a time) so that you can make sure it is
correct before proceeding to the next. It is a good idea to also keep a written account of the
given values (e.g. original balance, annual interest rate, etc.) as you will be asked to refer back
to these values as you go. Once you have "submitted" an answer to a question, you can click
back and forth between the parts if you need to, though you may need to click on "Reattempt
this question" at the top of the page. Don't worry, your correct answers will be saved!
Round all of your answers to the nearest cent when appropriate to do so. Some questions
are programmed to allow for slight variations in the answers due to rounding errors, BUT it is
important that you don't round values you are using in formulas. Only round your final
answers.
In this lab, you will be computing various values associated with paying off a balance
on a credit card. Imagine the following scenario:
You have received your monthly credit card statement and must now deal with the financial
realities of last month's
birthday celebration. While your birthday was deserving of a
celebration, dealing with the $1250 in credit card
charges will require some planning.
Your credit card statement lists the APR (Annual Percentage Rate) for your balance to be
14.6 % . This is the yearly
interest rate the credit card company uses in calculating interest
due on your balance.
Express the AP R as a decimal:
AP R = 0.146
The credit card company

compounds interest monthly.
Your monthly interest rate on credit card charges will be:
(Round your monthly interest rate to 5 decimal places)
AP R
i = = 0.01217
12
The minimum payment required by your credit card company is $25 per month. Assuming
that you do not make any new
charges to your account, you will answer the following
questions to help you determine the best plan for paying off this credit
card debt.
a) 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, you'll compute the interest and the
balance on the first few months assuming a the minimum monthly payment of $25.
Let B represent the balance for the k month and I represent the interest charged for the
k
th
k
k
th
month. For example, I is the interest charged on the original balance and B is the
1 1
original balance plus I minus the $25 payment (said differently, B is the balance after one
1 1
month). Start by finding those values. For this exercise, round all values to the nearest cent (2
decimal places). (Hint: I = i ⋅ B k) k−1
I1 = $ 15.21 B1 = $ 1240.21
Now use B to find the interest charged for the 2 month which is I , and the balance after
1
nd
2
2 months, which is B (don't forget to subtract the $25 payment).

2
I2 = $ 15.09 B2 = $ 1230.30
Got it? Ok, you're ready to figure out how much interest you will be charged for the rest of
the year and what your final balance will be after 12 months of just making the minimum
payment. Finish filling in the following "table".
I3 = $ 14.97 B3 = $ 1220.27
I4 = $ 14.85 B4 = $ 1210.12
I5 = $ 14.73 B5 = $ 1199.85
I6 = $ 14.60 B6 = $ 1189.45
I7 = $ 14.48 B7 = $ 1178.93
I8 = $ 14.35 B8 = $ 1168.28
I9 = $ 14.22 B9 = $ 1157.50
I10 = $ 14.09 B10 = $ 1146.59
I11 = $ 13.95 B11 = $ 1135.54
I12 = $ 13.82 B12 = $ 1124.36
b) How much of the original balance has been paid off at the end of the first year?
Answer: $ 125.64
c) What is the total amount that has been paid to the credit card company at the end of the
first year? (this is just your minimum payment per month times 12 months.)
Answer: $ 300
d) What percentage of what you paid went to paying the interest? Express your answer as a
percentage and round it to one decimal place.
Answer: 58.1 %
correct before proceeding to the next.
Part II
A formula for calculating the payment, P , required to pay off a debt of amount D in M
months with monthly
interest rate i is
D ⋅ i
P =
−M
1 − (1 + i)
a) Using this formula, solve for M . Use either the Common log, log, or the Natural log, ln.
Starting with `"M=", enter the whole formula:
M =
ln
(− D
P
·i
+1
)
−ln ( 1 + i )
If you need to, look back to Question 1 to recall the debt amount.
D = $ 1250.00
b) Determine the number of months it will take to pay off the credit card debt
with minimum
monthly payments of $25. You'll need the monthly interest rate from Part I: i = 0.01217.
Round the number of months to two decimal places.
Number of months: 77.52
c) How long is this in years, rounded to the nearest tenth of a year?
Answer: 6.5
d) What is the total amount paid to the credit card company, rounded to the nearest dollar?
(Hint: Multiply the payment amount with your answer to part b)).
Total Amount:$ 1938.00
e) How much of the total paid goes toward interest?
Interest:$ 682.69
Part III
Using the formula for M from question 2, answer the following questions:
a) Determine the number of months it will take to pay off the $1250 credit card debt
with a
monthly payment of $50. Round the number of months to two decimal places.
b) How long is this in years, rounded to the nearest tenth of a year?
Answer: 2.5
c) What is the total amount paid to the credit card company, rounded to the nearest dollar?
(Hint: Multiply the payment amount with your answer to part a))
Total Amount: $ 1499.50
d) How much of the total paid goes toward interest?
Interest: $ 240.97
Question 4 4/4 pts 99
Part IV
Using the formula for M from question 2, answer the following questions:
a) Determine the number of months it will take to pay off the $1250 credit card debt
with a
monthly payment of $75. Round the number of months to two decimal places.
b) How long is this in years, rounded to the nearest tenth of a year?
Answer: 1.6
c) What is the total amount paid to the credit card company, rounded to the nearest dollar?
(Hint: Multiply the payment amount with your answer to part a))
Total Amount: $ 1405.50
d) How much of the total paid goes toward interest?
Interest: $ 149.43
Part V
a) Using the formula for calculating the payment, P , determine how large of a payment is
required to pay off a debt in 12 months. Use the same monthly
interest rate i = 0.01217
and the same debt amount $1250 from the first question. The formula you need is:
D ⋅ i
P =
−M
1 − (1 + i)
P = $ 112.59
b) What is the total amount paid to the credit card company? (Hint: Multiply the payment
amount by 12).
Total amount: $ 1351.08
c) How much of the total paid goes toward interest?
Interest: $ 101.05
This needs to be a separate page that is typed, proof-read for typos, spelling, and grammar.
Your writing should be in an essay form (written in paragraphs). Use 12-point font and double
space. Add a title (e.g. Reflective Writing for Credit Card Lab).
Provide a brief introduction explaining the lab in your own words. Also in the introduction,
tell the audience which mathematical techniques you used in the lab (e.g. percentages,
payment formulas, logarithms, etc.). Then, please respond to each of the questions.
Do you think this project shows how math can be applied to the real world? If "yes",
please elaborate-why are the results important or beneficial? If "no", how could the lab
change to make it more applicable to the "real world"?
Can you give an example of another application where this type of analysis would be
beneficial? Be specific.
If you were a financial adviser, why would it be important to be able to explain the
details of this project to clients?
Did this assignment change your opinion of the usefulness of math? Write one
paragraph stating what ideas changed and why. If this project did not change the way
you think, write how this project gave further evidence to support your existing opinion
about applying math. Be specific.
What is the best plan for paying off a credit card balance? What is the worst approach
and why? What should you do if you can't afford the payments required for the best
plan? What are two things that the "average" consumer can learn by completing this
assignment?
ePortfolio: Post a copy of this lab, including the Reflective Writing, to your ePortfolio (if
you need to, scan a copy in the Copy Center). For more information about ePortfolios,
please see the syllabus.
I understand and will follow the directions.
True

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4/3/22, 5:48 PM Lumen OHM

Credit Card lab 2.0 Shannon Hawkes

Question 1 29/29 pts 94-99

due on your balance.

Express the AP R as a decimal:

The credit card company

Your monthly interest rate on credit card charges will be:

(Round your monthly interest rate to 5 decimal places)

month. To get a feel for how

2 months, which is B (don't forget to subtract the $25 payment).

I10 = $ 14.09 B10 = $ 1146.59

I11 = $ 13.95 B11 = $ 1135.54

I12 = $ 13.82 B12 = $ 1124.36

Question 2 8/8 pts 90-99

Number of months: 77.52

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

Total Amount:$ 1938.00

e) How much of the total paid goes toward interest?

Question 3 4/4 pts 98-99

Number of months: 29.99

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

Total Amount: $ 1499.50

d) How much of the total paid goes toward interest?

Question 4 4/4 pts 99

Number of months: 18.74

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

Total Amount: $ 1405.50

d) How much of the total paid goes toward interest?

Question 5 3/3 pts 99

Total amount: $ 1351.08

c) How much of the total paid goes toward interest?

Question 6 2/2 pts 99

I understand and will follow the directions.

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