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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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  1. 14 October, 12:43
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    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
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