Question

MC algo 5-37 Calculating Annuity Periods You have a credit card with a balance of $16,000 and an APR of 18.8 percent compounded monthly. You have been making monthly payments of $300 per month, but you have received a substantial raise and will increase your monthly payments to $375 per month. How many months quicker will you be able to pay off the account? 42.10 months 38.66 months 40.60 months 10.67 months 45.11 months

Answer 1

Ans 45.11 months

P =	Regular Payments
PV =	Loan Amount
r =	rate of interest
n =	no of periods
P =	r (PV)
	1 - (1 + r )-n
300 =	(18.8%/12)*16000
	1 - (1 / (1 + 18.8%/12)^n))
n =	116 months
P =	Regular Payments
PV =	Loan Amount
r =	rate of interest
n =	no of periods
P =	r (PV)
	1 - (1 + r )-n
375 =	(18.8%/12)*16000
	1 - (1 / (1 + 18.8%/12)^n))
n =	70.89
Difference =	116 - 70.89
	45.11 months