Question

PAYING OFF CREDIT CARDS Simon recently received a credit card with an 13% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $470. 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? Do not round intermediate calculations. Round your answer to the nearest month. month(s) b. If Simon makes monthly payments of $30, how many months will it be before he pays off the debt? Do not round intermediate calculations. Round your answer to the nearest month. month(s) c. How much more in total payments will Simon make under the $10-a-month plan than under the $30-a-month plan. Do not round intermediate calculations. Round your answer to the nearest cent. $

Answer 1

The formula for the credit card equation is:

N = -1/30. In ( 1 + b/p . (1-(1+ APR/365)³⁰)) / In(1+APR/365)

where:

• N = number of months to payoff the credit card
• APR = credit card annual interest rate
• b = balance of the credit card
• p = monthly payment to be made

a. it will take 67 monthly payments of $10.00 to pay off your credit card balance.

b. it will take 18 monthly payments of $30.00 to pay off your credit card balance.

c. Under the plan $10 per year he has to pay $ 670, Under the plan $30 per year he has to pay $540

That means 670 - 540 = $130 more in total payment