Question

Suppose you have a credit card balance of $15,000 which you want to repay in equal end-of-month payments for 5 years with a nominal annual interest rate of 18%, compounded monthly. What is the amount of the payments?

Answer #1

**The amount of the payment is computed as shown
below:**

**Present value = Monthly payment x [ (1 – 1 / (1 +
r) ^{n}) / r ]**

**r is computed as follows:**

= 0.18 / 12 (Since the payments are monthly, hence divided by 12)

**= 1.5% or 0.015**

**n is computed as follows:**

= 5 x 12 (Since the payments are monthly, hence multiplied by 12)

**= 60**

**So, the payment will be computed as
follows:**

$ 15,000 = Monthly payment x [ (1 - 1 / (1 + 0.015)^{60}
) / 0.015 ]

$ 15,000 = Monthly payment x 39.38026889

Monthly payment = $ 15,000 / 39.38026889

**Monthly payment = $ 380.90 Approximately**

Feel free to ask in case of any query relating to this question

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PV=
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