Khyshmah's Discover it (credit card) balance grew to 6,584

Finance Apr 01, 2021

Khyshmah's Discover it (credit card) balance grew to 6,584. If her interest rate is 22.2%, determine how much she pays back in total interest if the balance is paid off in 4 years. Do not put the dollar sign or any commas. Round to 2 decimal places.

Expert Solution

First we calculate Present Value or Principal:

Present Value = Future Value/(1+Rate)^Number of Periods

= 6,584/(1+22.2%)^4

Present Value = 2,952.60

So,

Interest Paid = Future Value - Present Value

= 6,584 - 2,952.60

Interest Paid = 3,631.40

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