8
QuizMultiple Choice

Paying Off Debt

Question 8 • Personal Finance - EL3403

Kimberly has a credit card with a 19% APR and a balance of $4,350. With her current monthly payment, Kimberly will be able to pay off the credit card in a mere 16 months. But when Kimberly's car breaks down, she is forced to charge an additional $1,600 to her credit card. How much will Kimberly's minimum monthly payment increase if she still wants to pay off her credit card in 16 months?

Answer
A
$100.00
B
$113.99
C
$309.90
D
$423.89

Explanation

To pay off the extra $1,600 in 16 months, calculate the monthly payment for that additional balance. Using a monthly interest rate of 19% ÷ 12, the payment is $1,600 × (0.19 ÷ 12) ÷ [1 − (1 + 0.19 ÷ 12)^−16], which is about $113.99. So Kimberly’s monthly payment must increase by $113.99, choice B.

AI-written and checked against the verified answer.

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