If Monty buys a new television for $800 this month and sends in a credit card payment of $1,200 when he gets his statement, how much interest will he pay on the television for the month?
Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
A) 18%
B) 1.5%
C) None, since he paid for the television in full during the grace period.
D) None of the above answers is correct.
Answer: B
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