Question

# Bucky Bavasi just bought a new TV that cost \$1,500. He plans to finance the purchase...

Bucky Bavasi just bought a new TV that cost \$1,500. He plans to finance the purchase with his new credit card which has an 18% nominal interest rate. The minimum payment on the card is \$24.16 per month. If he makes the minimum payment and makes no other charges, how many months will it take before he pays off the card?

Information provided:

Present value (PV)= \$1,500

Monthly payment= \$24.16

Monthly market rate= yield to maturity (I/Y)= 18%/12= 1.50% per month

The time taken to payoff the card is calculated by entering the below information in a financial calculator:

PV= -1500

PMT= 24.16

I/Y= 1.50

Press the CPT key and N to compute the time of the bond.

The value obtained is 179.86.

Therefore, it takes 179.86 months to payoff the card.

In case of any query, kindly comment on the solution.

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