Answer to Question #142991 in Economics for Shahir Sheikh

Question

Suppose Neiman Marcus sends Dakota a bill next month saying “Your minimum payment due is $100.” How much will she actually reduce her debt if she makes that minimum payment?

Answer 1

Since the payment includes two components, one of which is used to reduce the debt, and the second is used to pay off interest on the loan, the amount of debt will not decrease by $ 100, it will decrease by exactly the part that is not interest payment.