Question

14) Jake owes $3,990 on a credit card with an APR of 13.9 percent. How many months will it take him to pay off this balance if he makes monthly payments of $97.02? Assume he does not charge any further purchases.

A) 52.18 B) 54.18 C) 56.18 D) 58.18 E) 60.18

Answer 1

Monthly Payment = P * R * ( 1 + R)^N / [(1+r)^N - 1]

Where, R = rate per period

N = Number of periods

So, Rate per month =13.9% / 12

= 1.15833%

97.02 = 3990 * 1.15833% * ( 1 + 1.15833%)^N / ( 1 + 1.15833%)^N - 1)

97.02 /  46.217367 = 1.011583333^N / [(1.01158333333^N) - 1]

2.0992108 = 1.011583333^N / [(1.01158333333^N) - 1]

Now, Using hit and trial method, we will try to calculate value of N

Using N = 56.18

2.0992108 = 1.011583333^56.18 / [(1.01158333333^56.18) - 1]

2.0992108 =2.09910

So, Both the sides are equal,

Therefore, N = 56.18 is the correct answer