Question

One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a...

One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $560 per month. You will charge .96 percent per month interest on the overdue balance.

If the current balance is $14,780, how long will it take for the account to be paid off?

Homework Answers

Answer #1

It takes around 31 months to pay back

a Present value of annuity= P* [ [1- (1+r)-n ]/r ]
P= Periodic payment                                560
r= Rate of interest per period
Annual interest 11.52%
Number of interest payments per year 12
Interest rate per period 0.1152/12=
Interest rate per period 0.960%
n= number of periods:
Number of years 2.5485
Periods per year 12
number of periods 30.582
Present value of annuity= 560* [ (1- (1+0.0096)^-30.582)/0.0096 ]
Present value of annuity= 14,779.98
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