Number of Annuity Payments Joey realizes that he has charged too much on his credit card and has racked up $3,000 in debt.If he can pay $150 each month and the card charges 18 percent APR (compounded monthly),how long will it take him to pay off the debt?
A)13.03 months
B)14.68 months
C)20.00 months
D)23.96 months

Question

Quizplus · Accepted Answer

To find the number of months to pay off the debt, use the formula for the number of payments in an annuity: n = [log(PMT) - log(PMT - r*PV)] / log(1 + r), where PMT is the monthly payment, r is the monthly interest rate, and PV is the present value of the debt. Here, PMT = $150, r = 0.18/12, and PV = $3000. Solving this gives approximately 23.96 months.

Number of Annuity Payments Joey Realizes That He Has Charged