Question

You graduated college and as a graduation gift to yourself you want to buy a nice computer for $1600. You have used up all your savings by this point and will need to charge it to your credit card which has an annual interest rate of 18.99%. Assume you make no other purchases with your credit card. (3 points each)

a. You decided to make the minimum payment. Your bank calculates the minimum payment as 2% of your balance or $25 (whichever is greater). Set up an amortization table to show the month-by-month history of your balance. Paste the top five months of the table into the space below.

b. What is your balance after 70 months?  Type your answer into the space below.

c. How many months will it take you to pay off your balance? Type your answer into the space below.

Answer 1

Answers to the parts -

a) table provides as attachment

b) Balance after 70 months - USD 1,160 outstanding

c) it takes 155 months to pay off the total principal plus interest

note - information about the table

first we are computing the interest due on the balance outstanding to be paid

secondly we will determine the minimum amount payable which is either 2 % of the outstanding or 25 usd which ever is greater .

finally we will compute the closing balance due ( which is reducing minimum due from opening principal plus interest)