Question

"First, think twice before you add that purchase to your credit card. If you charged your $2500 spring break trip to your credit card or if you and your spouse just splurged for a $2500 flat screen television and charged it to your credit card, at 18% interest it would take you 34 years and six months to pay it off if you paid a 2% minimum balance and never charged another penny to your credit card."

Set-up an amortization table using the following information to answer the questions.

Total Number of Months: 414 (Make sure to stop your amortization table at the end of month 414.)

Balance: 2500 Interest rate: 18%

Monthly Payment: 2% of the balance but not less than $10

What is the payment amount during the last month (month 414)?

Answer 1

ANSWER::

1. The payment amount should be 11.91 to make the loan amount to zero

	a	b	c=(a)*2%	a+b-c
Month	Amount of loan	Interest at 18% pa	Repayment	closing balance
1	2,500.00	37.50	50.00	2,487.50
2	2,487.50	37.31	49.75	2,475.06
3	2,475.06	37.13	49.50	2,462.69
4	2,462.69	36.94	49.25	2,450.37
5	2,450.37	36.76	49.01	2,438.12
6	2,438.12	36.57	48.76	2,425.93
7	2,425.93	36.39	48.52	2,413.80
8	2,413.80	36.21	48.28	2,401.73
9	2,401.73	36.03	48.03	2,389.72
10	2,389.72	35.85	47.79	2,377.78
11	2,377.78	35.67	47.56	2,365.89
12	2,365.89	35.49	47.32	2,354.06
13	2,354.06	35.31	47.08	2,342.29
14	2,342.29	35.13	46.85	2,330.58
15	2,330.58	34.96	46.61	2,318.92
16	2,318.92	34.78	46.38	2,307.33
17	2,307.33	34.61	46.15	2,295.79
18	2,295.79	34.44	45.92	2,284.31
19	2,284.31	34.26	45.69	2,272.89
20	2,272.89	34.09	45.46	2,261.53
21	2,261.53	33.92	45.23	2,250.22
22	2,250.22	33.75	45.00	2,238.97
23	2,238.97	33.58	44.78	2,227.77
24	2,227.77	33.42	44.56	2,216.63

on continuing the same till last  

410	49.60	0.74	10.00	40.34
411	40.34	0.61	10.00	30.95
412	30.95	0.46	10.00	21.41
413	21.41	0.32	10.00	11.73
414	11.73	0.18	10.00	1.91

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