Simon recently received a credit card with a 19% nominal interest rate. With the card, he purchased an Apple iPhone 7 for $460.00. The minimum payment on the card is only $10 per month. a. If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Do not round intermediate calculations. Round your answer to the nearest whole number. month(s) b. If Simon makes monthly payments of $30, how many months will it be before he pays off the debt? Do not round intermediate calculations. Round your answer to the nearest whole number. month(s) c. How much more in total payments will Simon make under the $10-a-month plan than under the $30-a-month plan. Do not round intermediate calculations. Round your answer to the nearest cent.
Simon recently received a credit card with a 19% nominal interest rate. With the card, he purchased an Apple iPhone 7 for $460.00. The minimum payment on the card is only $10 per month. a. If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Do not round intermediate calculations. Round your answer to the nearest whole number. month(s) b. If Simon makes monthly payments of $30, how many months will it be before he pays off the debt? Do not round intermediate calculations. Round your answer to the nearest whole number. month(s) c. How much more in total payments will Simon make under the $10-a-month plan than under the $30-a-month plan. Do not round intermediate calculations. Round your answer to the nearest cent.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I dont know how to do A B and C
Transcribed Image Text:16. Problem 5.37 (Paying off Credit Cards)
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Simon recently received a credit card with a 19% nominal interest rate. With the card, he purchased an Apple iPhone 7 for $460.00. The minimum payment on the card is only $10 per month.
a. If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Do not round intermediate calculations. Round your
answer to the nearest whole number.
month(s)
b. If Simon makes monthly payments of $30, how many months will it be before he pays off the debt? Do not round intermediate calculations. Round your answer to the nearest whole
number.
month(s)
c. How much more in total payments will Simon make under the $10-a-month plan than under the $30-a-month plan. Do not round intermediate calculations. Round your answer to the
nearest cent.
Expert Solution
Step 1
The above formula describes the relationship between interest rate, loan amount, and no of payments of an annuity.
a) to find how long it takes Simon to payoff loan we need to write an equation with n as a dependent variable and it will follow as below equation
n = - log(1-Ar/p)/log(1+r)
here A = 460 , r = 19%/12 = 0.01583, p = 10
now we will insert these values in given equation
n = - log (1 - 7.2818/10)/log(1.01583)
n = log (0.27182)/log(1.01583)
n = 0.5657185/0.00682103
n = 83 months
so it take 83 months to pay 460 loan amount of credit card debt
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