Question

You have a balance of $500 on your credit card and make no more charges. Assume the card carries an APR of 19%. Suppose you want to pay off the card in six months by making equal payments each month. What is your monthly payment?

Answer 1

The monthly payment would be $ 87.76

Explanation:

Since, the monthly payment formula of a loan,

`P = (PV((r)/(12)))/(1-(1+(r)/(12))^(-n))`

Where,

PV = present value of the loan,

r = annual rate of interest,

n = number of months,

Here, PV = 500, r = 18% = 0.18, t = 6 months,

Hence, the monthly payment,

`P=(500((0.18)/(12)))/(1-(1+(0.18)/(12))^(-6))`

`\approx \$ 87.76` ( using calculator )