Name ___________________________________________________________ Date ____________Period ________ Calculating the Credit Pick any of the items below to purchase with

your new credit card that has an APR (interest rate) of 18% and compounds monthly. Use to table below to calculate how long it will take to pay off your large purchase when only paying the minimum payment of $25 month. The chart begins after your grace period ends and the credit card company begins to charge interest on your purchase. Choose one item to purchase:

Road Bike $165

Digital Camera : $160

Flip HD Camera : $179

Apple Ipod Nano $149

DJ Headphones : $145

Epiphone Electric Guitar: $170

Example: At the end of this month: You owe :

Calculated interest for this month in $$ : New Credit Card Bill says you owe:
You pay this amount to the Credit Card Company ((Minimum payment or amount owed, which ever is lower):

So Now You Owe :

1 2 3

$65 $40.00 $15.60

$0.00 $0.60 $0.23

$65.00 $40.60 $15.83

$25 $25 $15.83

$40.00 $15.60 $0.00

Column 1 is the month you are calculating. Columns 2 through 5 are written in dollar form rounded to the closest penny value. At the end of this month: You owe :
Calculated interest for this month in $$ : New Credit Card Bill says you owe:
You pay this amount to the Credit Card Company ((Minimum payment or amount owed, which ever is lower):

So Now You Owe :

$0.00

$25

a. How many months did it take to pay off for your purchase?____________________ b. How much interest did you end up paying?______________________________________ c. Name a realistic possiblity of why it could take longer than the number of months you calculated to pay off your purchase? ___________________________________________________________________________________ ___________________________________________________________________________________ ____________________________________________________________

Review Problems 1. Diego takes out $3250 in Unsubsidized Stafford Loan with an interest rate of 6.8% (this type of loan begins charging interest the moment he borrows the money). If the loan compounded quarterly, how much will he have to pay back in 1 year?

2. Angie has $100 to invest in an account. She needs to decide if she should put it in the savings account compounded yearly with an simple interest rate of 8% or in a savings account that is compounded monthly at 4%. Which account would have more money in 30 year? Show your work.

3. Dwayne inherits $43,800. If he puts it in a savings account that compounds monthly with an interest rate of 4.8%, how much money would he have in 2 years?

4. Joseph charges $4,000 on his credit card that compounds monthly at an interest rate of 11%. Assuming he doesnt get charged late fees and doesnt pay his bills, how much money would he owe in 7 months?