Question

Jeff has a balance of $2,513.77 on his credit card. He would like to pay off his card over the course of a year and a half by making identical monthly payments. The APR on his card is 10.66%, compounded monthly. Assuming that Jeff makes no additional purchases with his card, how much will he have to pay every month to reach his goal? (Round all dollar values to the nearest cent.)

Answer 1

$151.73

Explanation:

No doubt you were given a formula for computing the payment in this situation. You have not provided it here, so we have chosen to use "technology" to find the payment value. A financial calculator or app, or a spreadsheet program can do this computation for you.

_____

We believe the applicable formula to be ...

A = P·(r/12)/(1 -(1 +r/12)^(-18)) . . . . . where r is the annual interest rate; P is the starting balance, and 18 is the number of months over which payments will occur.

Filling in P=2513.77 and r=0.1066, this expression evaluates to ...

A = 2513.77·(.1066/12)/(1 -(1+.1066/12)^-18) ≈ 151.73472 ≈ 151.73