Question

Jamie owes $21,750 at a 5% APR compounded monthly. The minimum amount that she must pay monthly is $230.69. How much sooner can she pay off this loan if she makes monthly payment of $300 ?

Answer 1

Loan amount owed by Jamie = $21,750

Monthly Interest rate = APR/12 = 5%/12 = 0.4167%

Minimum monthly payment = $230.69

Calculating the number of months it will take Jamie to pay off the Loan using Excel "NPER" function:-

Number of Months = 120 months

- Now, Jamie makes monthly payment of $300 with evertything else remains the same.

Calculating the number of months it will take Jamie to pay off the Loan with monthly payment of $300 using Excel "NPER" function:-

Number of Months if Monthly payment is $300= 86.50 months

- Number of months sooner jamie can pay off the loan with $300 monthly payment = 120 months - 86.50 months

= 33.5 months or 2.79 years

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