Dennis Rodman has a $5,500 debt balance on his Visa card that charges an APR of 8 percent compounded monthly. Dennis's current minimum monthly payment is 4 percent of his debt balance, $220. How many months (round up) will it take Dennis to pay off his credit card if he pays the current minimum payment of $220 at the end of each month

Question

Van Castillo

Business

14 October, 12:36

Dennis Rodman has a $5,500 debt balance on his Visa card that charges an APR of 8 percent compounded monthly. Dennis's current minimum monthly payment is 4 percent of his debt balance, $220. How many months (round up) will it take Dennis to pay off his credit card if he pays the current minimum payment of $220 at the end of each month

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Answers (1)

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Joe Skinner · Answer 1

Answer: 27 months

Explanation:

First we need to convert the annual interest into monthly interest which is

Rate = 8% / 12 = 0.67%

The Payment / PMT = $220

and PV = $5,500

Number of months can be calculated by using the following excel formula:

=NPER (rate, pmt, pv, fv)

The NPER function is a financial function that is used to calculate the number of periods for loans or investments.

=NPER (8%/12,220,-5500,0)

= 27.44 months or 27 months