Solve the problem. Assume that the minimum payment on a credit card is the greater of $27 or 3% of the unpaid balance.
-If the annual interest rate is 15.99%, find the difference between the minimum payment and the interest owed on an unpaid balance of $748.44 that is 1 month overdue.
A) $12.54
B) $13.10
C) $17.03
D) $14.03

Question

Quizplus · Accepted Answer

First, we need to calculate the minimum payment. We take 3% of $748.44, which is $22.45. Since $27 is greater than $22.45, the minimum payment is $27.

Next, we need to calculate the interest owed. To do this, we first find the monthly interest rate:

15.99% / 12 = 1.33%

Next, we find the interest owed for the one month that the balance is overdue:

$748.44 x 1.33% = $9.96

Finally, we take the difference between the minimum payment and the interest owed:

$27 - $9.96 = $17.03

Therefore, the difference between the minimum payment and the interest owed on an unpaid balance of $748.44 that is 1 month overdue is $17.03. The minimum payment is the greater of $27 or 3% of the unpaid balance, which is $22.45. Therefore, the minimum payment is $27.

To find the interest owed, we first need to calculate the monthly interest rate:

15.99% / 12 = 1.33%

Next, we need to find out how much interest is owed on the unpaid balance of $748.44 for one month:

$748.44 x 1.33% = $9.96

The difference between the minimum payment of $27 and the interest owed of $9.96 is:

$27 - $9.96 = $17.04

Rounded to the nearest cent, the answer is $17.03. Therefore, the best choice is C.

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