ay, you borrowed $5,400 on a credit card that charges an interest rate of 14.2 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $110?

ay, you borrowed $5,400 on a credit card that charges an interest rate of 14.2 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $110?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 4QTD

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Question

Today, you borrowed $5,400 on a credit card that charges an interest rate of 14.2 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $110?

Expert Solution

Step 1

P = Principal = $5,400

r = rate of interest = 14.2% per annum

= 14.2 / 12 = 1.1833% per month

n = no of years = ?

A = Monthly installment = $110

$A = P * r * \frac{{(1 + r)}^{n}}{{(1 + r)}^{n} - 1}$

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