Question

In: Finance

Assume that you have a balance of $3200 on your MasterCard and that you make no...

Assume that you have a balance of $3200 on your MasterCard and that you make no more charges. Assume that MasterCard charges 12% APR and that each month you make only the minimum payment of 6% of the balance.

What will the balance be after 24 months? (Round your answer to the nearest cent.)

Solutions

Expert Solution

Given details in the question,

APR, or the interest rate yearly is 12% p.a.
Hence, the monthly rate is 12%/12, or r = 1% every month
The balance outsatnding at the start of the term is $3200.

Payment of 6% of the balance amount is made only every month.
Hence, to solve and find out the final value outstanding after 24 months, we need to apply the applicable monthly interest rate on the outstanding amount and add the Interest Amount to the outstanding value, pay off 6% off of it, and then use the same remaining and oustanding balance for computing the balance for next month. The calculation for the same is shown in the form of a table below.

TimeLine Outstanding Amount (Principal at Beginning of Month)

Total Amount due

(Principal * (1+r))

Net Outstanding Balance for next month (Total Amount Due - 6% Payment Made) or (0.94* Total Amount Due)
Month 1 3200 3232 3038.08
Month 2 3038.08 3068.4608 2884.353152
Month 3 2884.353152 2913.196684 2738.404883
Month 4 2738.404883 2765.788931 2599.841595
Month 5 2599.841595 2625.840011 2468.289611
Month 6 2468.289611 2492.972507 2343.394156
Month 7 2343.394156 2366.828098 2224.818412
Month 8 2224.818412 2247.066596 2112.2426
Month 9 2112.2426 2133.365026 2005.363125
Month 10 2005.363125 2025.416756 1903.891751
Month 11 1903.891751 1922.930668 1807.554828
Month 12 1807.554828 1825.630376 1716.092554
Month 13 1716.092554 1733.253479 1629.258271
Month 14 1629.258271 1645.550853 1546.817802
Month 15 1546.817802 1562.28598 1468.548821
Month 16 1468.548821 1483.23431 1394.240251
Month 17 1394.240251 1408.182654 1323.691694
Month 18 1323.691694 1336.928611 1256.712895
Month 19 1256.712895 1269.280024 1193.123222
Month 20 1193.123222 1205.054454 1132.751187
Month 21 1132.751187 1144.078699 1075.433977
Month 22 1075.433977 1086.188317 1021.017018
Month 23 1021.017018 1031.227188 969.3535567
Month 24 969.3535567 979.0470922 920.3042667

Hence, we can see from the table that at the end of 24 months, the net balance left to be paid rounded off to the nearest cent is $920.30


Related Solutions

Assume that you have a balance of $3000 on your MasterCard and that you make no...
Assume that you have a balance of $3000 on your MasterCard and that you make no more charges. Assume that MasterCard charges 12% APR and that each month you make only the minimum payment of 5% of the balance. Find how many months it will take to bring the remaining balance down to $400. (Round your answer to the nearest whole number.) Please do NOT use Excel
Assume that you have a balance of $9000 on your MasterCard and that you make no...
Assume that you have a balance of $9000 on your MasterCard and that you make no more charges. Assume that MasterCard charges 12% APR and that each month you make only the minimum payment of 5% of the balance. Find how many months it will take to bring the remaining balance down to $400. (Round your answer to the nearest whole number.)
Assume that you have a $22,500 balance on your credit card. You plan to make monthly...
Assume that you have a $22,500 balance on your credit card. You plan to make monthly payments of $450 until the balance is paid off. The interest rate on your credit card is 17.5% p.a., compounded monthly. A letter in the mail informs you that you are approved for a new credit card and balance transfers are subject to a 9.5% p.a., compounded monthly. How many months sooner will you pay off your bill?
Assume that you have a balance of $5300 on your Discover credit card and that you...
Assume that you have a balance of $5300 on your Discover credit card and that you make no more charges. Assume that Discover charges 21% APR and that each month you make only the minimum payment of 2% of the balance. Find how many months it will take to bring the remaining balance down to $2500. (Round your answer to the nearest whole number.) Answer is NOT 301
. You have a $28,000 balance on your credit card. You plan to make monthly payments...
. You have a $28,000 balance on your credit card. You plan to make monthly payments of $550 until the balance is paid off. The interest rate on your credit card is 19.5% p.a., compounded monthly. A letter in the mail informs you that you are approved for a new credit card and balance transfers are subject to a 8.5% p.a., compounded monthly. How many months sooner will you pay off your bill?
Assume you have a saving account that pays 4% APR. If you have a beginning balance...
Assume you have a saving account that pays 4% APR. If you have a beginning balance of$6000, How much do you need to save on a monthly basis in a saving account (add to your saving account) to have a down payment of $20000 for a house in 5 years
i need someone to find the answer for this question A MasterCard statement shows a balance...
i need someone to find the answer for this question A MasterCard statement shows a balance of $510 at 13.5% compounded monthly. What monthly payment will pay off this debt in 1 year 10 months? (Round your answer to the nearest cent.)
Make me a millionaire. Assume that you are a financial advisor. I have come to you...
Make me a millionaire. Assume that you are a financial advisor. I have come to you because I want to develop a plan for retiring early. I am currently 24 years old and I want to retire by age 55. That gives me 31 years to build wealth. I have just graduated from college and obtained my first job as an urban planner with a local city, earning $32,000 per year. People in this field usually top out at about...
In a certain city, 30% of the families have a MasterCard, 20% have an American Express...
In a certain city, 30% of the families have a MasterCard, 20% have an American Express card, and 25% have a Visa card. Eight percent of the families have both a MasterCard and an American Express card. Twelve percent have both a Visa card and a MasterCard. Six percent have both an American Express card and a Visa card. 31. Is possession of a Visa card independent of possession of a MasterCard? Why or why not? No, because P (M...
You have a $2,100 balance on your 10% credit card. You have lost your job and...
You have a $2,100 balance on your 10% credit card. You have lost your job and been unemployed for 6 months. You have been unable to make any payments on your balance. However, you received a tax refund and want to pay off the credit card. a. How much will you owe on the credit card if you have not made a payment for 6 months? (Round your answers to the nearest cent.) Interest Principal 1 months 2 months 3...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT