MATH: The Cost of Minimum Payments Part II: Practice Problem With two other classmates, complete the following practice problem. Each of you will complete calculations for one character profile while...

Managing Credit

https://edpuzzle.com/media/5e9675c71389903f10cfdc2e


https://edpuzzle.com/media/5e968798354ce83f698a7807

Worksheet for Review is attached.


MATH: The Cost of Minimum Payments Part II: Practice Problem With two other classmates, complete the following practice problem. Each of you will complete calculations for one character profile while your teammates will complete calculations for the other two character profiles. · Teacher Tip: You can also divide your class into 3 sections, each section solving for the 3 different characters. Then, bring the whole class back together to compare their calculations and continue Part III together. Three friends each spent $5,000 on their brand new credit cards with a 25% APR. They’ve decided that they will not make any other purchases on their cards until they pay off the debt and all make varying amounts of monthly payments: · Cecilia can set aside $200 per month to pay back her debt · Sharon can only make the credit card minimum payment, $100 per month · Alexander can pay $400 per month for his credit card After 5 months, how much will each person have had to pay in interest so far and how much will they still have to pay back? Use the formulas below to calculate their interest and balance for each month. Character: alexander Month / Billing Cycle Interest Monthly Payment Balance 1 104.17 200 4904.17 2 102.17 200 4806.34 3 100.13 200 4706.47 4 98.05 200 4604.52 5 95.93 200 4500.45 Total 500.45 Part III: Summary and Reflection Share your calculations with your teammates to complete questions together. 5. What were each characters’ total interest and balance? Character Total Interest Balance Sharon 521.71 5021.71 Cecilia 500.45 450.l45 Alexander 457.90 3457.90 6. Graph the data below. 5. Explain why it’s more costly to only pay the minimum payment amount for a credit card. Because if the minimum payment isn’t more than the interest the balance will increase. 6. What advice might you give these 3 friends? Do not charge the maximum amount on your credit card and make sure your payments are greater than the interest so you don’t accumulate debt. 7. Describe the basics of how compound interest works for credit card payments. Compound interest is when the interest is charged on a higher balance if you do not make payments. For example if you had $500 for one month and you didn’t make the minimum payment. The next month's interest would be charged on the $500 + whatever other charges you accumulated. www.ngpf.org Last updated: 4/16/20