Question

You have $4,000 on a credit card that charges a 15% interest rate. If you want to pay off the credit card in 5 years, how much will you need to pay each month (assuming you don't charge anything new to the card)?$____each month

Answer 1

Step-by-step explanation

Since we have $4,000, and we need to charge a 15% interest rate, we can apply the following relationship:

`A=P\left(1+(r)/(12)\right)^{^(12*t)}`

Plugging in the terms into the equation:

`A=4000\left(1+(0.15)/(12)\right)^(12*5)-4000`

Multiplying terms:

`A=4428`

Dividing this value into 5 years:

`Monthly\text{ payment=}(4428)/(5*12)=73.81`

In conclusion, we will need to pay $73.81