One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $500 per

Question

3 years ago

6

One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $500 per

month. You will charge 1.25 percent per month interest on the overdue balance.If the current balance is $11,500, how long will it take for the account to be paid off

Business

2 answers:

Lady_Fox [76] · Answer 1 · 2022-04-08T22:51:59+03:00

Lady_Fox [76]3 years ago

6 0

Answer:

27months

Explanation:

kati45 [8] · Answer 2 · 2022-04-08T20:49:08+03:00

Answer:

27.29 months

Explanation:

Using Present Value Annuity (PV A):

PV A = c x (1- 1/(1+r)^t)/r

c = Monthly repayment

t = time it will take to pay off

r = rate of interest per month

$ 11,500 = $500 x (1 – 1 / (1+0.0125)^t / 0.0125

When you solve this problem you get:

1/(1+0.0125)t = 1 – (($11,500)(0.0125) / ($500))

1/1.0125^t = 0.7125

1.0125^t = 1/0.7125

1.0125^t = 1.4035

t = In 1.4035 / In 1.0125

t = 27.29 months