Question

Cristina financed a $799 laptop with a 7.2% interest rate on a 2-year loan. If she can afford to make a $75 payment, how quickly can she pay off her laptop?

Answer 1

Your question is missing some elements but to answer the question I have to make an assumption.

Assuming that she make a monthly payment of $75.

The value of an loan at the end of the two year is given by


`FV=PV(1+r)^n`

where PV = $799, r = 7.2% = 0.072 and n = 2 years.

Thus,


`FV=799(1+0.072)^2=799(1.072)^2=799(1.149184)=\$918.20`

If she makes a monthly payment of $75, the number of months it will take her to pay off for her laptop is given by


`(\$918.20)/(\$75) =12.24\, months`

Therefore, it will take her 13 months to pay off for the laptop.