One of your customers is delinquent on his accounts payable balance. you've mutually agreed to a repayment schedule of $750 per month. you will charge 1.9 percent per month interest on the overdue balance. if the current balance is $18,000, how long will it take for the account to be paid off?

Question

Luka

Business

10 September, 19:56

One of your customers is delinquent on his accounts payable balance. you've mutually agreed to a repayment schedule of $750 per month. you will charge 1.9 percent per month interest on the overdue balance. if the current balance is $18,000, how long will it take for the account to be paid off?

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Tiggy · Answer 1

In this problem, we need to find the length of an annuity. We already identified the interest rate, the PV, and the payments.

Using the PVA equation: PVA = C ({1 - [1 / (1 + r) t]} / r

$18,000 = $750{[1 - (1/1.019) t] / 0.019}

Then solve for t:

1/1.019t = 1 - {[ ($18,000) / ($750) ] (0.019) }

1/1.019t = 0.544

1.019t = 1 / (0.544) = 1.838

t = ln 2.193 / ln 1.019 = 32.34 months or 2.7 in years