Helen recently received a credit card with a nominal interest rate of 21 percent. With the card, she purchased some new clothes for $250. The minimum payment on the card is only $20 per month. If Helen makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

Question

Trevin Strickland

Business

27 August, 15:18

Helen recently received a credit card with a nominal interest rate of 21 percent. With the card, she purchased some new clothes for $250. The minimum payment on the card is only $20 per month. If Helen makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

+1

Answers (1)

Know the Answer?

Brandon Bentley · Answer 1

It will take 14.2 months before Helen pays off the card.

Explanation:

PV Ordinary Annuity = C*[ (1 - (1+i/100) ^ (-n)) / (i/100) ]

C = Cash flow per period

i = interest rate

n = number of payments

250 = 20 * ((1 - (1 + 21/1200) ^ (-n*12)) / (21/1200))

n (in years) = 1.19

Months = years*12 = 1.19*12 = 14.2 months