Question

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 1.40 percent per month interest on the overdue balance. if the current balance is $13,000, how long will it take for the account to be paid off?

Answer 1

Answer:

2.71 years.

Explanation:

Answer 2

It will take 32.55 months for the account to be paid off.

In this question, we have r = 1.40%, PMT = $500 and Present Value = $13,000.

We can use the nper formula in Excel to arrive at the answer.

The formula in Excel is : =nper(rate, pmt, pv,[fv],[type])

When we substitute the values in the question, the nper formula looks like this:

=NPER(0.014,500,-13000)

We enter the present value of the amount outstanding as a negative value, since excel considers the present value as an outflow (expense).