Question

tim would like to use his income tax return to pay off one of his four credit cards. his previous plan was to pay off all four credit cards in the same timeline of 36 months. he wants to eliminate the card that is charging him the most interest on a monthly basis. the chart below outlines tims four credit cards, their balances, and their aprs. which credit card should tim use his tax return to pay off?

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$$\begin{array}{|c|c|c|} \\hline \\text{credit card} & \\text{balance} & \\text{apr} \\\\ \\hline \\text{a} & \\$1,260.00 & 12\\% \\\\ \\hline \\text{b} & \\$900.00 & 18\\% \\\\ \\hline \\text{c} & \\$1,290.00 & 9\\% \\\\ \\hline \\text{d} & \\$1,200.00 & 16\\% \\\\ \\hline \\end{array}$$

a. a
b. b
c. c
d. d

Explanation:

Read the credit card details from the table

Using the Table Reading knowledge point

$$
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$$

Calculate monthly interest rate for each card

Using the Annual Percentage Rate knowledge point

$$
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$$

Calculate monthly interest charged for each card

To find the monthly interest charged, we multiply each card's balance by its monthly interest rate:

$$
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$$

Compare monthly interest charges

We compare the calculated monthly interest charges to find the highest amount:

$$ \$16.00 (\text{Card D}) > \$13.50 (\text{Card B}) > \$12.60 (\text{Card A}) > \$9.68 (\text{Card C}) $$

Card D charges the most interest on a monthly basis.

Answer:

• a. A
• b. B
• c. C
• d. D (Correct answer)