Question

Brandi just received her credit card bill, which has an outstanding balance equal to $3,310. After reviewing her financial position, Brandi has concluded that she cannot pay the outstanding balance in full; rather, she has to make payments over time to repay the credit card bill. After thinking about it, Brandi decided to cut up her credit card. Now she wants to determine how long it will take to pay off the outstanding balance. The credit card carries an 18 percent interest, which is compounded monthly. The minimum payment that Brandi must make each month is $25. Assume that the only charge Brandi incurs from month to month is the interest that must be paid on the remaining outstanding balance.

a. If Brandi pays $222 each month, how long will it take her to pay of the credit card bill?

b. If Brandi pays $360 each month, how long will it take her to pay of the credit card bill?

Answer 1

If we use EMI calculation Formula to solve this.

Formula

EMI= P * r/m * (1+r/m)^nm/(1+r/m)^nm-1

Answer "a"

EMI= 222 P=3310 r=.018 m=12(Compounded monthly) n=tenure(answer we are looking for)

as per above formula all other number are given except tenure.

So we can use trial and error method to complete as sson as possible.

For tenure 12 months EMI is 303 which is higher than 222. So Let's check tenure at 24 months then EMI is 165.

So if we chek it 17 months EMI is exact 222.

Answer for "a" is 17 months.

Same as question a, other question also solvable.

Answer for 'b" is 10 months.

Other method we can use to solve is usinf log system. For that we required log table and other thing.