QUESTION 7 Part A: You owe $60,000 on your credit card. The credit card charges interest...

QUESTION 7

Part A: You owe $60,000 on your credit card. The credit card charges interest monthly and has an APR of 18.0%. You want to pay off the debt in 60 months. What is the monthly payment?

a. 1,624.5

b. 1,523.6

c. 1,752.6

d. 1,758.9

Part B: You want to buy a house, 5 years from now, and you plan to save $60,000 per year, beginning one year from today. You will make 5 deposits in an account that pays 6.0% interest. Your account already has a balance of $50,000. How much will you have just after you make the 5th deposit, 5 years from now (in S’000s)?

a. $376.5

b. $385.8

c. $395.4

d. $405.1

e. $415.2

Solutions

Expert Solution

1.
PV = 60000
Nper = 60
Rate = 18% / 12 = 1.5%
FV = 0

Monthly payments can be calculated by using the following excel formula:
=PMT(rate,nper,pv,fv)
=PMT(1.5%,60,-60000,0)
= $1,523.6

Monthly payments = $1,523.6

2.
Nper = 5
Rate = 6%
PMT = 60000
PV = 50000

Future value can be calculated by using the following excel formula:
=FV(rate,nper,pmt,pv)
=FV(6%,5,-60000,-50000)
= $405,136.86 or $405.1 (in thousands)

Future value = $405.1

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

You owe $2000 on a credit card that charges 20% interest. You have $2200 in your...

You owe $2000 on a credit card that charges 20% interest. You have $2200 in your savings account that earns 1.69% interest. Your savings account charges $14.50 a month if you keep a balance of less than $1500 a month. Compare the amount of interest for both to decide what you should do about paying the credit card bill. Consider all factors in the decision. Show your for any calculations you may completed.

You owe $1500 on a credit card that charges 2% interest each month. You can pay...

You owe $1500 on a credit card that charges 2% interest each month. You can pay $50 each month with no new charges. What is the equilibrium value? When will the account be paid off? A) Equilibrium value is 2500 and the account will be paid off approximately after 47 months. B) Equilibrium value is 50 and the account will be paid off approximately after 47 months. C) Equilibrium value is 2500 and the account will be paid off approximately...

You owe $10,000 on a credit card with an interest rate of 15%, which is compounded...

You owe $10,000 on a credit card with an interest rate of 15%, which is compounded monthly. If you make payments of $1,000 per month, how many months will it take you to pay off your debt? (Enter the answer to 2 decimal places)

You owe 2000 dollars on your credit card which has an interest rate of 18% per...

You owe 2000 dollars on your credit card which has an interest rate of 18% per year compounded monthly. If you plan to pay it off in 4 years, what are your monthly payments? 2 decimals What are the total payments? Round to nearest whole dollar. How much total interest is paid? Nearest whole dollar. What is the unpaid balance after 1 year? Round to nearest whole dollar.

"You currently owe $2480 on your credit card, which calculates interest based on 18.23% APR, compounded...

"You currently owe $2480 on your credit card, which calculates interest based on 18.23% APR, compounded daily. You make quarterly payments of $724 at the end of every quarter, and you make your first payment exactly one quarter from now. How many quarters until you pay off your credit card debt? Assume 91 days in each quarter. Express your answer as an integer (number of quarters)."

Suppose you owe $900 on your credit card and you decide to make no new purchases...

Suppose you owe $900 on your credit card and you decide to make no new purchases and to make the minimum monthly payment on the account. Assuming that the interest rate on your card is 2% per month on the unpaid balance and that the minimum payment is 3% of the total (balance plus interest), your balance after t months is given by B(t)=900(0.9894t).Find your balance at each of the given times. Complete parts (a) through (e) below. (a) six...

You have $4,000 on a credit card that charges a 14% interest rate. If you want...

You have $4,000 on a credit card that charges a 14% interest rate. If you want to pay off the credit card in 4 years, how much will you need to pay each month (assuming you don't charge anything new to the card)?

1. You have $2,500 on a credit card that charges a 12% interest rate. If you...

1. You have $2,500 on a credit card that charges a 12% interest rate. If you want to pay off the credit card in 3 years, how much will you need to pay each month (assuming you don't charge anything new to the card)? 2. You want to buy a $228,000 home. You plan to pay 10% as a down payment, and take out a 30 year loan for the rest. a) How much is the loan amount going to...

Suppose you owe $1200 on your credit card. The annual percentage rate (APR) is 18%, compounded...

Suppose you owe $1200 on your credit card. The annual percentage rate (APR) is 18%, compounded monthly. The credit card company says your minimum monthly payment is $21.82. a. If you make only this minimum payment, how long will it take for you to repay the $1200 balance (assuming no more charges are made)? b. If you make the minimum payment plus $10.01 extra each month (for a total of $31.83), how long will it take to repay the $1200...

You have been offered a credit card that charges an interest rate of 9% per semiannual...

You have been offered a credit card that charges an interest rate of 9% per semiannual period. By regulation, they must disclose (in the fine print) an APR to their customers. What is the APR they disclose and what is their EAR?

Subjects