Question

Bob’s car needs a new transmission, a repair that will cost $1,763.00. Bob does not have enough money in his savings account to cover the cost of the repair. To make matters worse, Bob’s mechanic, who works out of his home, is unable to accept credit cards. Bob is hesitant to take out a cash advance on his credit card knowing that it will take him 12 months to pay of the balance and that a cash advance comes with a 30% interest rate. If Bob uses a cash advance to pay for the repairs, how much extra will he have to pay in interest?

Answer 1

171.87*12=2062.44
2062.44-1763=299.44

Answer 2

The extra amount to be paid by Bob is calculated using and amortization schedule and is equal to  $299.44

What is the amount to be paid by Bob using the cash advance?

The amount to be paid by Bob using the cash advance is calculated using the amortization schedule.

Using the Amortization Schedule, a cash advance of $1,763.00 at 30% interest with 12 monthly payments.

$A= \frac{P(i(1+i)^{n}}{((1 + i)^{n−1}}$

where:

• A = monthly payment
• P = amount borrowed = $1763
• i = monthly interest
• n = number of months

Calculating the monthly payment, A for the 1 year loan:

i = monthly interest = 0.30/12

n = number of months = 1 × 12 = 12 months

$A = \frac{1763(0.30/12 (1 + 0.30/12)^{24})}{((1 +.045)^{24-1})} = 171.87$

Monthly payment, A =$17187

Total Payments = $171.87 × 12 = $2,062.44

Interest = $2,062.44 - $1763

Interest = $299.44

Therefore, the extra amount or interest to be paid by Bob is $299.44.

Learn more about amortization at: https://brainly.com/question/12829776

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