Isaac realizes that he charged too much on his credit card and has racked up $7,000 in debt. If he can pay $275 each month and the card charges 17.55 percent APR (compounded monthly), how long will it take him to pay off the credit card? How much interest expense will Isaac pay during this time?
A) 32.07 months; $8,819.25
B) 32.07 months; $1,819.25
C) 22.07 months; $8,819.25
D) 22.07 months; $1,819.25

Question

Quizplus · Accepted Answer

To determine the time it will take Isaac to pay off the credit card and the total interest paid, we can use the formula for the payment on an installment loan or an amortization calculator. Given the principal amount ($7,000), the monthly interest rate (17.55% APR / 12 = 1.4625% per month), and the monthly payment amount ($275), we find it will take approximately 32 months to pay off the debt. The total interest paid over this period is calculated by subtracting the original debt from the total amount paid, which is $1,819.25.

Isaac Realizes That He Charged Too Much on His Credit