One of your customers is delinquent on his accounts payable balance. You’ve mutu
ID: 2809487 • Letter: O
Question
One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $750 per month. You will charge 2.1 percent per month interest on the overdue balance.
If the current balance is $20,000, how long will it take for the account to be paid off?
One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $750 per month. You will charge 2.1 percent per month interest on the overdue balance.
If the current balance is $20,000, how long will it take for the account to be paid off?
Explanation / Answer
Present value of Annuity = A*[(1-(1+r)-n)/r]
Where
A - Annuity payment = 750
r - rate per period = 2.1%
n - no. of periods =?/
20000= 750* [(1-(1.021)-n)/.021]
[(1-(1.021)-n)/.021] =20000/750 = 26.6666666667
1-(1.021)-n = 26.6666666667*.021 = .56
1.021^-n = 1-.56=.44
-n = log.44/log1.021
= -0.35654732351/0.00902574208
= -39.503380481
n = 39.50 months = 3.29 years
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