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Meryl buys new baseball equipment for $2000. The purchase made is with a credit card that has a 19% APR. Meryl makes a $150 payment monthly. How many months will it take Meryl to pay off the balance?

Sagot :

Answer:

It will take Meryl 15.09 months to pay off the balance.

Step-by-step explanation:

This can be calculated using the formula for calculating the present value of an ordinary annuity as follows:

PV = P * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)

Where;

PV = Present value or the cost of the new baseball equipment = $2000

P = Monthly payment = $150

r = Monthly interest rate = annual percentage rate (APR) / 12 = 19% / 12 = 0.19 / 12 = 0.0158333333333333

n = number of months it will take Meryl to pay off the balance = ?

Substitute the values into equation (1) and solve for n, we have:

2000 = 150 * ((1 - (1 / (1 + 0.0158333333333333))^n) / 0.0158333333333333)

2000 / 150 = (1 - (1 / 1.0158333333333333)^n) / 0.0158333333333333

13.3333333333333 = (1 - 0.984413453650536^n) / 0.0158333333333333

13.3333333333333 * 0.0158333333333333 = 1 - 0.984413453650536^n

0.21111111111111 = 1 - 0.984413453650536^n

0.984413453650536^n = 1 - 0.21111111111111

0.984413453650536^n = 0.78888888888889

loglinearize both sides, we have:

nlog0.984413453650536 = log0.78888888888889

n = log0.78888888888889 / log0.984413453650536

n = -0.102984160720249 / -0.00682245957075587

n = 15.0948729929724

Rounding to 2 decimal places, we have:

n = 15.09

Therefore, it will take Meryl 15.09 months to pay off the balance.

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