Question

You have just entered a two-year MBA program and have decided to pay for your living expenses using a credit card that has no minimum monthly payment. You intend to charge $2,000 per month on the card for the next 24 months. The card carries an APR of 24%, with monthly compounding. How much money will you owe on the card 25 months from now, when you receive your first statement post-graduation?

Answer 1

Total debt= $60,843.72

Step-by-step explanation:

Giving the following information:

You intend to charge $2,000 per month on the card for the next 24 months. The card carries an APR of 24%, with monthly compounding.

To calculate the total amount of debt at the end of the period, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit= 2,000

n= 24

i= 0.24/12= 0.02

FV= {2,000*[(1.02^24)-1]}/0.02= $60,843.72