Question

"First, think twice before you add that purchase to your credit card. If you charged your $2500 spring break trip to your credit card or if you and your spouse just splurged for a $2500 flat-screen television and charged it to your credit card, at 18% interest it would take you 34 years and six months to pay it off if you paid a 2% minimum balance and never charged another penny to your credit card."

Set-up an amortization table using the following information to answer the questions.

Total Number of Months: 414 (Make sure to stop your amortization table at the end of month 414.)

Balance: 2500

Interest rate: 18%

Monthly Payment: 2% of the balance but not less than $10.

1. What is the payment amount during the last month (month 414)?

2. Use the PMT function to determine the monthly amount you would need to pay to have a balance of 0 at the end of 24 months. What is the payment amount?

Answer 1

1. The payment amount should be 11.91 to make the loan amount to zero

	a	b	c=(a)*2%	a+b-c
Month	Amount of loan	Interest at 18% pa	Repayment	closing balance
1	2,500.00	37.50	50.00	2,487.50
2	2,487.50	37.31	49.75	2,475.06
3	2,475.06	37.13	49.50	2,462.69
4	2,462.69	36.94	49.25	2,450.37
5	2,450.37	36.76	49.01	2,438.12
6	2,438.12	36.57	48.76	2,425.93
7	2,425.93	36.39	48.52	2,413.80
8	2,413.80	36.21	48.28	2,401.73
9	2,401.73	36.03	48.03	2,389.72
10	2,389.72	35.85	47.79	2,377.78
11	2,377.78	35.67	47.56	2,365.89
12	2,365.89	35.49	47.32	2,354.06
13	2,354.06	35.31	47.08	2,342.29
14	2,342.29	35.13	46.85	2,330.58
15	2,330.58	34.96	46.61	2,318.92
16	2,318.92	34.78	46.38	2,307.33
17	2,307.33	34.61	46.15	2,295.79
18	2,295.79	34.44	45.92	2,284.31
19	2,284.31	34.26	45.69	2,272.89
20	2,272.89	34.09	45.46	2,261.53
21	2,261.53	33.92	45.23	2,250.22
22	2,250.22	33.75	45.00	2,238.97
23	2,238.97	33.58	44.78	2,227.77
24	2,227.77	33.42	44.56	2,216.63

on continuing the same till last  

410	49.60	0.74	10.00	40.34
411	40.34	0.61	10.00	30.95
412	30.95	0.46	10.00	21.41
413	21.41	0.32	10.00	11.73
414	11.73	0.18	10.00	1.91

2.The amount to be paid permonth is 124.81

	a	b	c=(a)*2%	a+b-c
Month	Amount of loan	Interest at 18% pa	Repayment	closing balance
1	2,500.00	37.50	124.81	2,412.69
2	2,412.69	36.19	124.81	2,324.07
3	2,324.07	34.86	124.81	2,234.12
4	2,234.12	33.51	124.81	2,142.82
5	2,142.82	32.14	124.81	2,050.15
6	2,050.15	30.75	124.81	1,956.10
7	1,956.10	29.34	124.81	1,860.63
8	1,860.63	27.91	124.81	1,763.73
9	1,763.73	26.46	124.81	1,665.37
10	1,665.37	24.98	124.81	1,565.54
11	1,565.54	23.48	124.81	1,464.21
12	1,464.21	21.96	124.81	1,361.37
13	1,361.37	20.42	124.81	1,256.98
14	1,256.98	18.85	124.81	1,151.02
15	1,151.02	17.27	&nbs 0 0 Add a comment Know the answer? Your Answer: Post as a guest Your Name: What's your source? Earn Coins Coins can be redeemed for fabulous gifts. Log In Sign Up Post as anonymous Post Your Answer Not the answer you're looking for? Ask your own homework help question Similar Questions You charged $2,000 on your credit card for a trip during Spring break. Your credit card... You charged $2,000 on your credit card for a trip during Spring break. Your credit card company charges you 22% annual interest, compounded monthly. If you make the minimum payments of $50 per month, how long will it take ( to the nearest month) to pay off your balance? Answer choices: A. 81 months B. 73 months C. 70 months D.79 months You have a balance of $22,800 on your current credit card. The interest rate charged by... You have a balance of $22,800 on your current credit card. The interest rate charged by this credit card is 19.8 percent compounded monthly. 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