Question

Tony is offering two repayment plans to Phil for a long overdue loan. Offer 1 is a visit from an enforcer and the debt is due in full at once. Offer 2 is to pay back $4,200 at the end of the year at 24% interest rate until the loan principal is paid off. Phil owes Tony $10,000. How long will it take for Phil to pay off the loan if he takes Offer 2?

Answer 1

It will take approximately 29 months for Phil to pay off the loan if he takes Offer 2.

Step-by-step explanation:

To calculate how long it will take for Phil to pay off the loan if he takes Offer 2, we need to determine the monthly payment and then divide the total loan amount by the monthly payment. The loan principal is $10,000, and the repayment plan is $4,200 at the end of the year at a 24% interest rate.

To find the monthly payment, we can divide $4,200 by 12 to get $350.

Next, we can calculate how many months it will take to pay off the loan by dividing $10,000 by $350. It will take approximately 28.57 months to pay off the loan, which is around 29 months.