Assume you have a balance of $3200 on your credit card that you want to pay off. Calculate your monthly payment andtotal payment under the given conditions. Assume you make no additional charges to the card.
-The credit card APR is 19% and you want to pay off the balance in 2 years.

Question

Quizplus · Accepted Answer

To calculate the monthly payment for a loan (or credit card balance in this case), you can use the formula for the monthly payment on an installment loan: $P = \frac{rPV}{1 - (1 + r)^{-n}}$, where P is the monthly payment, r is the monthly interest rate (annual rate divided by 12), PV is the present value or initial amount of the loan, and n is the total number of payments. For this problem, the APR is 19%, so the monthly interest rate is $19\% / 12 = 1.5833\%$, or 0.015833 as a decimal. The initial balance is $3200, and the total number of payments is 2 years times 12 months/year = 24 months. Plugging these values into the formula gives the monthly payment, and multiplying the monthly payment by 24 gives the total payment. The correct answer, A, reflects the correct calculation based on these inputs.

Assume You Have a Balance of $3200 on Your Credit