You finance a $500 car repair completely on credit, you will just pay the minimum payment each month for the next three months. The APR is 18.99% and the minimum payment each month is 4% of the balance. Determine the finance charge, carry-over balance, and minimum payment required for each of the next two months, and the starting balance for month 2 in the table below.

Determination of the Finance Charge, Carry-over balance, Minimum Payment for each of the next two months:

Finance Charge:

First month = $7.91

Second month = $7.72

Carry-over balance:

First month = $487.59

Second month = $475.50

Minimum Payment:

First month = $20.32

Second month = $19.81

Starting balance (Carry-over balance + Finance charge):

First month = $507.91

Second month = $495.31

Step-by-step explanation:

a) Data and Calculations:

Credit Finance = $500

APR = 18.99%

Minimum monthly payment = 4% of the balance

Monthly rate of interest = 0.1899/12 = 0.015825

Finance Charge:

First month = $7.91 ($500 * 0.015825)

Second month = $7.72 ($487.59 * 0.015825)

Carry-over balance:

First month = $487.59($507.91 - $20.32)

Second month = $475.50 ($495.31 - $19.81)

Minimum Payment:

First month = $20.32 ($507.91 * 4%)

Second month = $19.81 ($495.31 * 4%)

Starting balance (Carry-over balance + Finance charge):

First month = $507.91 ($500 + $7.91)

Second month = $495.31 ($487.59 + $7.72)

answer: c, the green line

step-by-step explanation:

there is no black line, eliminate b.

simple interest implies periodic payments, but the red line shows no payments, eliminate d.

simple interest has equal payments. if paid say every day, the graph is about a straight line (actually a stairstep).

the yellow line is not straight, eliminate a.

check: the green line is straight, answer is c.

simple interest with positive interest rate gives a straight line sloping up to the right. green line:

g(t) = $100 + ($200-$100) ÷ (20 years) × (t years)

= $100 + (4%/year) × ($100)(t years)

incidentally, the yellow line curving upward represents continuously compounded interest

y = $100 × 2^(t years / (14 assuming the yellow line hits $200 at 14 years. 2^0 is 1, so y(0) = $100; 2^(14/14) is 2, so y(14) = $200.