Number of Annuity Payments 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?
A)27.23 months
B)33.33 months
C)46.56 months
D)69.70 months

Question

Quizplus · Accepted Answer

To find the number of months it will take to pay off the debt, we 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 = $300, r = 0.18/12 = 0.015, and PV = $10,000. Plugging in these values, we find N ≈ 46.56 months.

Number of Annuity Payments Phoebe Realizes That She Has Charged