Simon recently received a credit card with an 16% nominal interest rate. With th
ID: 2648605 • Letter: S
Question
Simon recently received a credit card with an 16% nominal interest rate. With the card, he purchased an Apple iPhone 5 for $460. The minimum payment on the card is only $20 per month.
A?If Simon makes the minimum monthly payment and makes no other charges, how many months will it be before he pays off the card? Round your answer to the nearest whole.
B?If Simon makes monthly payments of $60, how many months will it be before he pays off the debt? Round your answer to the nearest whole.
C?How much more in total payments will Simon make under the $20-a-month plan than under the $60-a-month plan. Make sure you use 3 decimal places for N. Round your answer to the nearest cent.
Explanation / Answer
Interest rate on credit card =16%.
Cost of the i phone = $460.
Monthly payment =$20.
Answer for Question no:1
Assuming 16% nominal interest rate is per annum, following is the loan repayment schedule.
Therefore, it will take 28 months for the repayment of the loan, if $20 is paid per month.
Answer for question b:
If a montly payment of $60 is paid, it will take 9 months for the repayment of $460. Following is the schedule for repayment is as under:
Answer for Questoin no C):
Total no of months $20 is paid for repayment of $460 = 27 months and in the last month a principal amount of$12.88 and an interest payment of $0.17 is to be paid totalling to $13.05.
Therefore total payments made = 27*$20 + $13.05 =$5,53.05 is made.
When a $60 per month plan is opted, total number of months for repayment is 8 months plus a principal outstanding of $8.41 and interest payment of $0.11 totalling to $8.52 is made in the 9th month.
=8*$60 +$8.52
=$488.52
Excess payment made when a $20 plan is opted when compated to $60 plan is A-B
=$5,53.05 - $488.52
=$64.53.
Month EMI Interest Principal repayment Balance Principal to be repaid 1 $20.00 $6.13 $13.87 $446.13 2 $20.00 $5.95 $14.05 $432.08 3 $20.00 $5.76 $14.24 $417.84 4 $20.00 $5.57 $14.43 $403.41 5 $20.00 $5.38 $14.62 $388.79 6 $20.00 $5.18 $14.82 $373.98 7 $20.00 $4.99 $15.01 $358.96 8 $20.00 $4.79 $15.21 $343.75 9 $20.00 $4.58 $15.42 $328.33 10 $20.00 $4.38 $15.62 $312.71 11 $20.00 $4.17 $15.83 $296.88 12 $20.00 $3.96 $16.04 $280.84 13 $20.00 $3.74 $16.26 $264.58 14 $20.00 $3.53 $16.47 $248.11 15 $20.00 $3.31 $16.69 $231.42 16 $20.00 $3.09 $16.91 $214.50 17 $20.00 $2.86 $17.14 $197.36 18 $20.00 $2.63 $17.37 $180.00 19 $20.00 $2.40 $17.60 $162.40 20 $20.00 $2.17 $17.83 $144.56 21 $20.00 $1.93 $18.07 $126.49 22 $20.00 $1.69 $18.31 $108.18 23 $20.00 $1.44 $18.56 $89.62 24 $20.00 $1.19 $18.81 $70.81 25 $20.00 $0.94 $19.06 $51.76 26 $20.00 $0.69 $19.31 $32.45 27 $20.00 $0.43 $19.57 $12.88 28 $20.00 $0.17 $19.83 -$6.95Related Questions
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