Most Credit Cards Provide for a Minimum Finance Charge Of 50

question 194

Multiple Choice

Most credit cards provide for a minimum finance charge of $50$ cents per month. Suppose that you buy a $38 item, make five monthly payments of $5, and then pay the remaining balance. What are the payments and the total interest for this purchase if the interest rate is 12% but you pay the minimum finance charge?

• A) 5 payments of $5 plus a last payment of $2.50; total payments of $40.50 with interest of $2.50.
• B) 5 payments of $5 plus a last payment of $2.50; total payments of $40.50 with interest of $15.50.
• C) 5 payments of $5 plus a last payment of $2.50; total payments of $53.50 with interest of $15.50.
• D) 5 payments of $5 plus a last payment of $15.50; total payments of $40.50 with interest of $2.50.
• E) 5 payments of $5 plus a last payment of $15.50; total payments of $53.50 with interest of $15.50.

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