Answer to Question #70244 in Finance for Nick Mango

Question #70244
You went shopping a month ago, racking charges of $2,000 to your credit card along the way. Then the credit card statement comes, and it says your minimum monthly payment is only $40. Suppose you only pay the minimum payment of $40 every month. If the stated interest rate is 24%/year, compounded monthly, how long does it take for you to pay off your credit card debt? For simplicity, assume the first payment is due immediately, and your credit card company starts charging you interest after the first day of the first payment.
Expert's answer
Charges of $2,000 to your credit card, minimum monthly payment is $40,
interest rate is 24%/year, compounded monthly.
The time you need to pay off your credit card debt is:
P = r*PV*(1 + r)^n/((1 + r)^(n) - 1),
40 = 0.24/12*1960*(1 + 0.24/12)^n/((1 + 0.24/12)^n - 1),
40 = 39.2*1.02^n/(1.02^n - 1),
40*(1.02^n - 1) = 39.2*1.02^n,
0.8*1.02^n = 40,
1.02^n = 50,
n = 197.5 month or 16.5 years.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

LATEST TUTORIALS
New on Blog
APPROVED BY CLIENTS
paypal