Today, you borrowed $3,200 on a credit card that charges an interest rate of 12.9 percent, compounded monthly. How long will it take you to pay off this debt assuming that you do not charge anything else and make regular monthly payments of $60?

Question

Quizplus · Accepted Answer

First, we need to calculate the monthly interest rate:

12.9% / 12 months = 1.075%

Now, we can use the formula for the time it takes to pay off a debt with regular payments:

t = (-1/12) * log(1 - r*b/p) / log(1 + r)

where: 
r = monthly interest rate (1.075%) 
b = initial balance ($3,200) 
p = monthly payment ($60)

Plugging in the numbers:

t = (-1/12) * log(1 - 0.01075*3200/60) / log(1 + 0.01075)

t ≈ 6.64 years

Therefore, the best choice is C.

Today, You Borrowed $3,200 on a Credit Card That Charges