A Credit Card has an outstanding balance of $9,450.84 and carries an interest rate of 25% compounded monthly. It is to be paid off with equal monthly payments over a period of 10 years.
What will be the balance of the Credit Card debt after 6 full years. And what would be the total interest paid over the 10-year period? Thanks.
This is a relatively involved and time consuming calculation.
1) - You have to use the formula for calculating the monthly payment of this balance.
2) - You have to use the FV formula to find the FV of $9,450.84 over a period of 6 years.
3) - You have to use the FV formula to find the FV of the monthly payments calculated in 1 above over a period of 6 years.
4) - You subtract the result obtained in 3 from the result obtained in 2 above to get the balance of the Credit Card after 6 years.
5) - The toal interest paid over 10 years is: The monthly payment calculated in 1 above X 120 - $9,450.84.
6) - If you are allowed to use Spreadsheets, then do an amortization schedule which will calculate and tally everything for you such as this one I found on the Internet:
http://www.calculator.net/amortization-calculator.html?cloanamount=9450.84&cloanterm=10&cinterestrate=25.00&printit=0&x=49&y=11
7) - Just copy above URL and put it the address bar of your Browser and you will see everything done for you(if you allowed to do so!). Good luck to you.
