So it's a month before you leave and you're seriously considering putting a vacation on your credit card? Well, we looked at interest a little bit in March. Now we'll look a little deeper. Interest is often compounded or broken up and applied in smaller amounts. Credit cards use compounded interest, so do banks, and almost every other lending institution. Here's the deal: Annual interest rates are broken down to smaller segments of time.

Compounded Monthly Interest Rate = Annual Interest Rate / 12
We saw this in March, where an annual interest rate of 8% became a monthly rate of .667% (8% / 12). Then, each month a total balance was added up and the interest rate applied. Set up similar tables to model the following situations:

1. You buy a $2500 big screen TV for no money down at 15% annual interest, compounded monthly, with no payments for the first six months. Sounds like a good deal, but how much will you owe at the end of that first 6 months? Create a table showing month number, current balance, interest, and new balance for each month.






2. You put a $560 mountain bike on your credit card, which charges 16.8% annual interest compounded monthly. The next month, you start paying $50 a month. How long until you pay that off, if you make no other charges? Create a table showing month number, current balance, interest, payment and new balance for each month.