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1 October, 19:56

You have just entered a two-year MBA program and have decided to pay for your living expenses using a credit card that has no minimum monthly payment. You intend to charge $2,000 per month on the card for the next 24 months. The card carries an APR of 24%, with monthly compounding. How much money will you owe on the card 25 months from now, when you receive your first statement post-graduation?

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  1. 1 October, 20:17
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    Total debt = $60,843.72

    Explanation:

    Giving the following information:

    You intend to charge $2,000 per month on the card for the next 24 months. The card carries an APR of 24%, with monthly compounding.

    To calculate the total amount of debt at the end of the period, we need to use the following formula:

    FV = {A*[ (1+i) ^n-1]}/i

    A = monthly deposit = 2,000

    n = 24

    i = 0.24/12 = 0.02

    FV = {2,000*[ (1.02^24) - 1]}/0.02 = $60,843.72
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