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 1.9 percent per month interest on the overdue balance. if the current balance is $18,000, how long will it take for the account to be paid off?
In this problem, we need to find the length of an annuity. We already identified the interest rate, the PV, and the payments. Using the PVA equation: PVA =C({1 – [1/(1 +r)t]} /r $18,000 = $750{[1 – (1/1.019) t] / 0.019} Then solve for t: 1/1.019t= 1 − {[($18,000)/($750)](0.019)} 1/1.019t= 0.544 1.019t= 1/(0.544) = 1.838 t= ln 2.193 / ln 1.019 = 32.34 months or 2.7 in years
