Question

Johann owes $9,889 on a credit card with a 23.5% interest rate. What is the monthly payment he should make to pay off this debt in 12 months, assuming he does not charge any more purchases with the card? (2 points)

$824.08
$932.71
$206.30
$2,524.44

Answer 1

Option B: $932.71

Explanation:

He owes $9,889 on a credit card with a 23.5% interest rate.

Thus;

Current balance; P = $9,889

Interest rate; r = 23.5% = 0.235

Number of compounding; n = 12

We will use the formula;

A = P(r/n)/(1 -(1 +r/n)^(-nt))

t is number of years = 1

Thus;

A = (9889 × 0.235/12)/(1 - (1 + (0.235/12))^(-12 × 1)

A = (9889 × 0.019583)/(1 - (1 + (0.235/12))^(-12))

A = $932.71