Personal Financial Literacy>Calculating Total Loan Repayment Costs Under Different Rates and Periods(TEKS.Math.8.12.B)
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Texas 8th Grade Math › Personal Financial Literacy>Calculating Total Loan Repayment Costs Under Different Rates and Periods(TEKS.Math.8.12.B)
Credit card balance: $2,520 at 18% APR. Minimum payment: $75 per month. Online calculator excerpt after 12 months:
- Total paid: $900
- Interest paid: $540
- Principal paid: $360
- Remaining balance: $2,160
How much interest did Maya pay during the first 12 months?
$360
$540
$900
$2,160
Explanation
From the amortization output, interest paid is given directly as $540. It also matches total paid minus principal paid (900 − 360 = 540). With high APR and minimum payments, most of the payment goes to interest, so the balance stays high.
Borrowing $1,000 for a phone. Two payoff options from an online calculator: Option A: 12-month installment at 18% APR
- Monthly payment: $92
- Total paid: $1,104
- Total interest: $104 Option B: 24-month installment at 12% APR
- Monthly payment: $47
- Total paid: $1,128
- Total interest: $128
Which option has the lower total cost to repay the loan?
Option A: $1,104
Option B: $1,128
Both cost $1,000
Option B has lower cost because $47 < $92
Explanation
Total cost is the total of all payments. Option A costs $1,104, which is less than Option B's $1,128. A lower monthly payment does not mean a lower total cost; the longer term adds more interest.
Easy-access cash advance: $500 at very high APR. Online calculator shows a $75 fee each 2-week rollover if not repaid. After 6 weeks (3 rollovers):
- Total fees paid: $225
- Principal still owed: $500
If the loan is rolled over for 6 weeks and nothing is paid toward principal, how much has been paid in interest/fees?
$75
$500
$725
$225
Explanation
Each rollover adds a $75 fee. Three rollovers cost 3 × $75 = $225 in fees, while the $500 principal remains. High fees and no principal reduction make these loans very expensive.
Installment loan for a bike: $1,200 at 15% APR, 24 months. Online calculator:
- Monthly payment: $58
- Total paid: $1,392
- Total interest: $192
What is the total cost of repaying this loan?
$1,200
$1,258
$1,392
$192
Explanation
Total cost is the sum of all payments over the term, which the calculator gives as $1,392. This equals principal ($1,200) plus interest ($192). APR and term determine both the payment and total interest.
Credit card balance: $2,400 at 22% APR. Minimum payment: $50 per month. Online calculator excerpt after 6 months:
- Total paid: $300
- Interest paid: $260
- Principal paid: $40
- Remaining balance: $2,360
Which statement is best supported by this amortization excerpt?
The balance drops by $50 each month.
Most of each minimum payment goes to interest in the first months.
Paying the minimum will pay off the card in 6 months.
The APR doesn't affect how long it takes to repay.
Explanation
In 6 months, $300 was paid but only $40 reduced the balance; $260 was interest. That shows most of each minimum payment is interest at first. High APR and small minimums keep balances high and extend repayment time.