Bill was going to purchase a new mountain bike with his credit card, which he thought had an APR of 13%. His plan was to keep his payments around $75 per month for 24 months. He then found out that his credit card actually had an APR of 17%. Which of the following would not allow Bill to purchase a bike while keeping the same monthly payment?
Answer
A
Purchase a bike that costs less.
B
Wait for the bike he wants to go on sale for a cheaper price.
C
Purchase the bike in a part of town with a higher sales tax rate.
D
Increase the number of months he wants to use to pay off the balance.
Explanation
A higher APR increases the interest charged, so Bill can keep his $75 monthly payment by borrowing less or taking more time to repay. Buying a less expensive bike or waiting for a sale reduces the amount he borrows, while increasing the number of months spreads repayment out. A higher sales tax rate increases the total cost instead, so it would not help him keep the same payment.
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