Question

Your credit card has a balance of ​$4200 and an annual interest rate of 19​%. You decide to pay off the balance over years. If there are no further purchases charged to the​ card, you must pay ​$211.75 each​ month, and you will pay a total interest of ​$882.00 Assume you decide to pay off the balance over one year rather than two. How much more must you pay each month and how much less will you pay in total​ interest?

Use PMT= P
to determine the regular payment amount.

Answer 1

When paying off the balance over one year instead of two, you would need to pay $152.49 more each month and pay $444.24 less in total interest.

Step-by-step explanation:

To find out how much more you must pay each month and how much less you will pay in total interest when you decide to pay off the balance over one year rather than two, we can use the PMT function.

The PMT function calculates the regular payment amount based on the interest rate, the number of periods, and the present value of the loan. In this case, the present value is $4200, the interest rate is 19% per year, and the number of periods is 12 months.

Using the PMT function, we find that the regular payment amount when paying off the balance over one year is $364.24 (rounded to the nearest cent). Therefore, you would need to pay $364.24 each month, which is $152.49 more than the $211.75 you would pay each month over two years.

In terms of total interest, you would pay $437.86 in interest when paying off the balance over one year, which is $444.24 less than the $882.00 you would pay in interest over two years.