Question

You owe $2,264.96 on a credit card at a 14.7% APR. You pay $500.00/month. How many months does it take to pay off your balance?

Answer 1

you would pay 500 for 4 months and then you would pay 264.96 in the last month so your answer would be 5

Answer 2

5 months

Explanation:

Since, time-to-pay off formula for a credit card is,

`n=(log((M)/(M-Pr)))/(log(1+r))`

Where, P is owing amount,

r is rate per period,

M is payment per period,

Here, P = $ 2,264.96,

M = $ 500.00 per month

APR = 14.7 % = 0.147 ⇒ r =
`(0.147)/(12)`

Hence, the number of months does it take to pay off the balance,

`n=(log((500.00)/(500.00-2264.96* (0.147)/(12))))/(log(1+(0.147)/(12)))`

`=4.68894564931\approx 5`

Therefore, It will take approx 5 months to pay off the balance.