Question

37319427201906034878041&SBN 9780257123300163393380 CENGAGE MINDTAP Ch 05 End-of-Chapter Problems - Time Value of Money 1 011 Q Search this course Back to A Attempts: Keep the Highest 113 LIMITED 13. Problems 5.37 Catalog Click here to read the eBook Future Values dick here to read the Book Seminal and Other Compounding periods Offers PAYING OFF CREDIT CARDS Options Simon recently received a credit card with an 15 on the card is only $20 per month min interest with the card he purchased sole Phones for the e Success Center trial of CENGAGE UNLIM a. Simon makes the minimum monthly payment and makes no other charges, how many months will be herehe past round intermediate calculations. Round your answer to the nearest month. month(s) b. Simon makes monthly payments of 360, how many months wilt be before he pas of the Dea d Round your answer to the nearest month month(s) C. How much more in total payments wSimon make under the $20-a-month plan than under the 40-month pe r und calculations. Round your answer to the nearest cant START TRIAL med Learn more Ora New

Answer 1

a]

Each month, $20 is paid, and interest is charged at 15% annual rate on the remaining balance.  

Monthly rate = annual rate / 12 = 15% / 12 = 1.25%

Interest in each month = outstanding at beginning of month * monthly rate

It will be paid paid off in 23 months.

3 в Outstanding at beginning 1 Month of month 2 1 $390.00 2 $374.88 3 $359.56 4 $344.06 5 $328.36 6 $312.46 7 $296.37 8 $280.07 9 $263.57 10 $246.87 11 $229.95 12 $212.83 14 13 $195.49 15 14 $177.93 15 $160.15 16 $142.16 17 $123.93 18 $105.48 19 $86.80 20 $67.89 $48.73 $29.34 $9.71 Outstanding at end of Payment Interest |month $20.00 $4.88 $374.88 $20.00 $4.69 $359.56 $20.00 $4.49 $344.06 $20.00 $4.30 $328.36 $20.00 $4.10 $312.46 $20.00 $3.91 $296.37 $20.00 $3.70 $280.07 $20.00 $3.50 $263.57 $20.00 $3.29 $246.87 $20.00 $3.09 $229.95 $20.00 $2.87 $212.83 $20.00 $2.66 $195.49 $20.00 $2.44 $177.93 $20.00 $2.22 $160.15 $20.00 $2.00 $142.16 $20.00 $1.78 $123.93 $20.00 $1.55 $105.48 $20.00 $1.32 $86.80 $20.00 $1.09 $67.89 $20.00 $0.85 $48.73 $20.00 $0.61 $29.34 $20.00 $0.37 $9.83 $0.12 $0.00 22 $9.71

AB 20 20 20 20 20 Outstanding at beginning 1 Month of month 21 390 3 2 =E2 43 =E3 5 4 =E4 65 =E5 7 6 =E6 8 7 =E7 9 8 =E8 10 9 =E9 11 10 =E10 12 11 =E11 13 12 =E12 14 13 =E13 15 14 =E14 16 15 =E15 17 16 =E16 18 17 =E17 19 18 =E18 20 19 =E19 21 20 =E20 22 21 =E21 23 22 =E22 24 23 =E23 Payment Interest =B2 1.25% 20 =B3 1.25% 20 =B41.25% =B5 1.25% =B6 1.25% =B7.1.25% =B81.25% 20 =B9 1.25% =B10*1.25% =B11 1.25% =B12 1.25% =B13 1.25% =B14 1.25% =B15 1.25% =B16 1.25% =B17*1.25% 20 =B18*1.25% 20 =B19 1.25% =B20*1.25% =B21 1.25% =B22*1.25% =B23 1.25% =B24-024 =B24.1.25% Outstanding at end of month =B2-C2-D2 =B3-C3+D3 =B4-C4+D4 =B5-C5-D5 =B6-C6+D6 =B7-C7+D7 =B8-C8+D8 =B9-C9+D9 =B10-C10+D10 =B11-C11+D11 =B12-C12+D12 =B13-C13+D13 =B14-C14+D14 =B15-C15-D15 =B16-C16+D16 =B17-C172D17 =B18-C18-018 =B19-C19-D19 =B20-C20-D20 =B21-C21-D21 =B22-C22-D22 =B23-C23-D23 =B24-C24-D24 20 20

b]

Each month, $60 is paid, and interest is charged at 15% annual rate on the remaining balance.  

Monthly rate = annual rate / 12 = 15% / 12 = 1.25%

Interest in each month = outstanding at beginning of month * monthly rate

It will be paid paid off in 7 months.

1 A B C D E Outstanding Outstanding at beginning at end of 1 Month of month Payment Interest |month $390.00 $60.00 $4.88 $334.88 - 2 $334.88 $60.00 $4.19 $279.06 3 $279.06 $60.00 $3.49 $222.55 $222.55 $60.00 $2.78 $165.33 5 $165.33 $60.00 $2.07 $107.40 6 $107.40 $60.00 $1.34 $48.74 $48.74 $49.35 $0.61 ($0.00)

E m mo 00 AB Outstanding at beginning 1 Month of month Payment Interest 2 1 390 60 =B2*1.25% 3 2 =E2 60 =B3*1.25% =E3 =B4*1.25% =E4 60 =B5*1.25% 60 =B6*1.25% =B7*1.25% =B8+D8 =B8*1.25% Outstanding at end of month =B2-C2+D2 =B3-C3+D3 =B4-C4+D4 =B5-C5+D5 =B6-C6+D6 =B7-C7+D7 =B8-C8+D8 TES 60

c]

Total payments under $20 plan = ($20 * 22) + $9.83 = $449.83

Total payments under $60 plan = ($60 * 6) + $49.35 = $409.35

Excess of payments under $20 plan =  $449.83 - $409.35 = $40.48