In: Finance

# Obligation Debt Amount Min Monthly Amount Annual Interest Rate Student loans $40,000.00$500.00 6.00% Car loan...

Obligation Debt Amount Min Monthly Amount Annual Interest Rate Student loans $40,000.00$500.00 6.00% Car loan $11,500.00$375.00 9.50% Chase credit card $2,100.00$84.00 18.00% Amazon credit card $1,050.00$42.00 15.00% TJ Maxx credit card $380.00$15.00 24.00% You recently graduated with a reasonably well paying job and after reviewing your budget you have an extra $200 a month to put towards paying off your debts as you have built up an appropriate savings. In exactly 12 months, you have been promised a raise that will allow you to put a total of$400 a month towards paying down debts (original $200 plus another$200). How many months will it take to pay off the chase card if you pay the minimum monthly amount listed above on the Chase card? Hint: the first month the interest rate is 18%/12 = 1.5%. The interest owed is 1.5% of $2,100 =$31.50. So you will pay down your debt by $42-$31.50 = $10.50. This means you owe$2,100 - $10.50 =$2,089.50 the next month. (Use a spreadsheet!!). Your answer is between 90 and 100 months!! Use this technique later down below.Discuss two approaches a) paying the highest interest rate debts first or b) paying of the smallest first. Which is theoretically best and which is emotionally best for people. Do appropriate research and reference.

## Solutions

##### Assume you are to borrow money, the loan amount, at an annual interest rate to be...
Assume you are to borrow money, the loan amount, at an annual interest rate to be paid in equal installments each period. Installment Loan Schedule Loan Amount $25,000 Annual Interest Rate 9.90% Periods per year 12 Years to payback 5 See Table B.3 in book. Factor 47.17454194 FACTOR = [1 - (1 / ((1 + R)^n)]/ R Equal Payments$529.95 let R = period interest rate let n = number of periods to payback loan Number of periods: 60 Reduction...