Question

suppose your credit card balance is 15000. the minimum payment is 321, and the annual percentage rate is 19.2 %. if you make a constant monthly payment of 321, how long will it take you to pay off the credit card balance? How much interest will you pay if you elect to make the minimum payment ? (answee has to be exact and rounded to four decimal places )

Answer 1

Amount outstanding = 15,000
Monthly payment = 321

Annual interest rate = 19.20%
Monthly interest rate = 19.20% / 12
Monthly interest rate = 1.60%

Let it will take n payments to pay off the outstanding amount

15,000 = 321 * PVIFA(1.60%, n)

Using financial calculator:
I = 1.60%
PV = 15000
PMT = -321
FV = 0

N = 86.75

Number of monthly payment = 86.75

Time period in years = 86.75 / 12
Time period in years = 7.23

Therefore, it will take 87 months or 7.23 years to pay off the credit card balance

Total amount paid = 86.75 * 321
Total amount paid = 27,846.75

Total interest paid = Total amount paid - Amount outstanding
Total interest paid = 27,846.75 - 15,000
Total interest paid = 12,846.75