Phoebe realizes that she has charged too much on her credit card and has racked up $10,000 in debt. If she can pay $300 each month and the card charges 18 percent APR (compounded monthly), how long will it take her to pay off the debt?

Question

Quizplus · Accepted Answer

To find the time to pay off the debt, we use the formula for the number of payments in an amortizing loan: N = -log(1 - r*P/A) / log(1 + r), where P is the principal ($10,000), A is the monthly payment ($300), and r is the monthly interest rate (18% APR compounded monthly, so 0.18/12 = 0.015). Plugging in these values gives approximately 46.56 months.

Phoebe Realizes That She Has Charged Too Much on Her