Simon recently received a credit card with an 18% nominal interest rate. with the card, he purchased a new stereo for $350. the minimum payment on the card is only $10 per month. if simon makes monthly payments of $30, how many months will it be before he pays off the debt? round to the nearest month.

Question

Isaias Cross

Business

29 September, 09:33

Simon recently received a credit card with an 18% nominal interest rate. with the card, he purchased a new stereo for $350. the minimum payment on the card is only $10 per month. if simon makes monthly payments of $30, how many months will it be before he pays off the debt? round to the nearest month.

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Answers (1)

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Madeleine · Answer 1

Use the formula of the present value of an annuity ordinary.

The formula is

pv=pmt [ (1 - (1+r/k) ^ (-n)) : (r/k) ]

Pv present value 350

PMT monthly payment 30

R interest rate 0.18

K compounded monthly 12

N number of months?

350=30 [ (1 - (1+0.18/12) ^ (-n)) : (0.18/12) ]

Solve for n

350/30=[ (1 - (1+0.18/12) ^ (-n)) : (0.18/12) ]

((350/30) * (0.18/12)) - 1 = - (1+0.18/12) ^ (-n)

-0.825 = - (1+0.18/12) ^ (-n)

0.825 = (1+0.18/12) ^ (-n)

N=-log (0.825) : log (1+0.18:12)

N=12.9 months round your answer to get 13 months