Calculate the minimum payment for the first and second payments.

Question

Calculating minimum payment. You have a credit card with an APR of 36%. The minimum payment is 10% of the balance. Suppose you have a balance of $850. You decide to stop charging and make only the minimum payment. Calculate the minimum payment for the first and second payments. (Be sure to take into account the finance charges. Round your answers to the nearest cent.)

First payment=$_______

Second Payment=$________

Answer 1

Assuming (as is usually the case) that monthly interest (36%/12 or 3%) is calculated before payments, then:

First month's balance including interest = 1.03*850 = 875.50

10% of that (the minimum payment) would be 87.55, leaving a balance of 787.95.

Simply repeat the above steps to figure the 2nd payment (fractions usually round up when dealing with loans.)