Question

Emilio’s accountant told him that if he continues to pay $50 a month on his credit card, it will take him 42 years to pay off his current balance (assuming the interest rate doesn’t change, and assuming he doesn’t charge anything else on that card). His credit card interest rate is 18.99% What is his balance?

Answer 1

Emilio continues to pay $ 50 a month on creadit card.

It will take him 42 years, i.e., 504 monthly payments

Calculating the Balance using Present value of ANnuity:

Where, C= Periodic Payments = $50

r = Periodic Interest rate= 0.1899/12 = 0.015825

n= no of periods =504

Present Value = $ 3158.40

So, his Balance is $ 3158.40

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