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PAYING OFF CREDIT CARDS Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $372.71. The minimum payment on the card is only $10 per month. a. If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Round to the nearest month. b. If Simon makes monthly payments of $35, how many months will it be before he pays off the debt? Round to the nearest month. c. How much more in total payments will Simon make under the $10-a-month plan than under the $35-a-month plan? Make sure you use three decimal places for N.

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Fundamentals of Financial Manageme...

8th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285065137

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Chapter
Section
BuyFindarrow_forward

Fundamentals of Financial Manageme...

8th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285065137
Chapter 5, Problem 37P
Textbook Problem
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PAYING OFF CREDIT CARDS Simon recently received a credit card with an 18% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $372.71. The minimum payment on the card is only $10 per month.

  1. a. If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Round to the nearest month.
  2. b. If Simon makes monthly payments of $35, how many months will it be before he pays off the debt? Round to the nearest month.
  3. c. How much more in total payments will Simon make under the $10-a-month plan than under the $35-a-month plan? Make sure you use three decimal places for N.

a.

Summary Introduction

To calculate: The time taken to pay off the card.

Credit Cost:

It is the amount in addition to the amount borrowed, which a borrower has to pay to take credit. It has various charges like interest and other fees. As creditor lends his money, he asked for some charges, which are mandate.

Explanation of Solution

Solution:

To calculate number of months, use “NPER” formula in spreadsheet,

Table (1)

Steps required to calculate number of months by using “NPER” function in excel are,

  • Select ‘Formulas’ option from Menu Bar of spreadsheet...

b.

Summary Introduction

To calculate: Time taken to pay off the card.

c.

Summary Introduction

To calculate: Difference in total payment made with $10 monthly payment and $35 monthly payment.

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Chapter 5 Solutions

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)
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