Credit reduces future income The disposable income from your

Credit reduces future income. The disposable income from your part-time job in 2013 and 2014 is $12,000. In 2013, you borrowed $500 at 18% interest. You repaid your loan with interest in 2014. How much would you have available for spending in 2014?

Solution

Amount borrowed in 2010 = $500
Interest rate = 18%
Interest for one year = $500 x .18 x 1 = $90
Loan repaid with interest in 2014 = $500 + $90 = $590
Spending amount available in 2014 = $12,000 - $590 = $11,410