Question

Helen recently received a credit card with a nominal interest rate of 21 percent. With the card, she purchased some new clothes for $250. The minimum payment on the card is only $20 per month. If Helen makes the minimum monthly payment and makes no other charges, how long will it be before she pays off the card?

Answer 1

Answer:

It will take 14.2 months before Helen pays off the card.

Explanation:

PV Ordinary Annuity = C*[(1-(1+i/100)^(-n))/(i/100)]

C = Cash flow per period

i = interest rate

n = number of payments

250= 20*((1-(1+ 21/1200)^(-n*12))/(21/1200))

n(in years) = 1.19

Months = years*12 = 1.19*12 = 14.2 months