Question

You have a credit card with a balance of $10,300 and an APR of 16.9 percent compounded monthly. You have been making monthly payments of $205 per month, but you have received a substantial raise and will increase your monthly payments to $255 per month. How many months quicker will you be able to pay off the account?

23.80 months

27.77 months

25.92 months

9.85 months

24.99 months

Answer 1

Correct option is > 27.77 months

Using financial calculator BA II Plus - Input details:	Payment $205	Payment $255
FV = Future Value =	$0.00	$0.00
PV = Present Value =	$10,300.00	$10,300.00
I/Y = Rate / Frequency of compounding =	1.4083333333	1.4083333333
PMT = Payment or coupon or regular payment / frequency =	-$205.00	-$255.00
CPT > N = Total number of months for paying off =	87.925	60.158

Difference = Payment @ $205 - Payment @ $255

Difference = 87.925- 60.158

Difference = 27.77 months