Question

You charged $2,000 on your credit card for a trip during Spring break. Your credit card company charges you 22% annual interest, compounded monthly. If you make the minimum payments of $50 per month, how long will it take ( to the nearest month) to pay off your balance?

Answer choices:

A. 81 months

B. 73 months

C. 70 months

D.79 months

Answer 1

Information provided:

Present value= $2,000

Interest rate= 22%/12= 1.83% per month

Monthly payment= $50

Th time to pay off the balance is calculated by entering the below in a financial calculator:

PV= -2,000

I/Y= 1.83

PMT= 50

Press the CPT key and N to compute the time to pay off the balance.

The value obtained is 72.6109.

Therefore, the time to pay off the balance is 72.6109 months 73 months.

Hence, the answer is option b.

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