Question

1. Suppose your Master Card Charges an APR of 17.49%. Your previous statement showed a balance of $600, you made a payment of $200. You then bought $350 worth of electronics, which you charged on your Master Card. Let’s make a spreadsheet

   1. Suppose in the second month you make a payment of $250 and then go make purchases of $460. Complete the second month of the spreadsheet.

   2. Suppose in the third month you make a payment of $175 and then make purchases of $55 and $120. Complete the third month of the spreadsheet.

   3. How long will it take you to pay off the card if you make no additional purchases and pay $50 per month?

Answer 1

Credit Card Loan Amount = PV = $819.08

r = monthly interest rate = 17.49%/12 = 1.4575%

n = number of months

P = Monthly payment = $50

Credit Card loan Amount = P * [1 - (1+r)^-n] / r

$819.08 = $50 * [1 - (1+1.4575%)^-n] / 1.4575%

[1 - (1+1.4575%)^-n] = 0.23876182

(1+1.4575%)^-n = 0.76123818

(1.014575)^n = 1.3136493

n = 18.853675 months

Therefore, it will take 19 months to payoff the amount fully