Linda owes $3,861 on a credit card with a 22.3% interest rate compounded monthly. What is the monthly payment she should make in order to pay off this debt in 2 years, assuming she does not charge any more purchases with the card?
+118628 Linda owes $3,861 on a credit card with a 22.3% interest rate compounded monthly. What is the monthly payment she should make in order to pay off this debt in 2 years, assuming she does not charge any more purchases with the card?
That interest rate is a nominal annual rate.
The effective rate is really 22.3/12 = 1.8583 repeater % per month
So you have
rate =i = 0.0185833333 repeater
number of time intervals = n=24
PV=$3861
Payments made at the end of each period so it is the present value of an ordinary annuity.
\(3861=C*\frac{1-1.018583333333^{-24}}{0.018583333333}\\ 3861\div \frac{1-1.018583333333^{-24}}{0.018583333333}=C\\\)
3861/((1-1.018583333333^-24)/0.018583333333) = 200.87401691850546370528435959
Monthly payment (at end of month) = $200.87
I am going to assume that you already know and have the formula to calculate a loan payment! Based on that, Linda's monthly payment on her Credit Card over a 2-year, or 24-month period @ 22.3% will be =$200.87.
+118628 Linda owes $3,861 on a credit card with a 22.3% interest rate compounded monthly. What is the monthly payment she should make in order to pay off this debt in 2 years, assuming she does not charge any more purchases with the card?
That interest rate is a nominal annual rate.
The effective rate is really 22.3/12 = 1.8583 repeater % per month
So you have
rate =i = 0.0185833333 repeater
number of time intervals = n=24
PV=$3861
Payments made at the end of each period so it is the present value of an ordinary annuity.
\(3861=C*\frac{1-1.018583333333^{-24}}{0.018583333333}\\ 3861\div \frac{1-1.018583333333^{-24}}{0.018583333333}=C\\\)
3861/((1-1.018583333333^-24)/0.018583333333) = 200.87401691850546370528435959
Monthly payment (at end of month) = $200.87
