11 Questions
How was the interest of $3098.96 for the 1st month calculated?
Interest for 1st month = $595,000 x 0.0625 / 12 = $3098.96
What is the principal at the start of the 6th month?
$594,173.96
How much has Claire paid off the principal after 5 months?
$5,826.04
How much interest was paid in the first 5 months?
$15,354.04
Calculate the balance at the end of the 2nd month.
$593,343.62
What is the purpose of a credit card?
To purchase items and pay for them later
Explain the concept of a credit limit.
The maximum amount a cardholder is approved to spend using the credit card account.
What is the interest-free period on many credit cards?
55 days
How are cash advances different from regular purchases on a credit card?
Cash advances have a higher interest rate and do not have an interest-free period.
Discuss the advantages and disadvantages of credit cards with high credit limits.
Advantage: Greater purchasing power; Disadvantage: Higher risk of overspending and debt accumulation.
Why should balance transfer credit cards be considered carefully?
They may contain extra costs.
Test your knowledge on calculating interest and reducing balance loans using a scenario where Claire borrows $595,000 at 6.25% p.a. interest for a studio apartment. Analyze the progress of the loan for the first 2 months based on monthly payments of $3925.
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