Question

One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $620 per month. You will charge 1.02 percent per month interest on the overdue balance.

If the current balance is $14,840, how long will it take for the account to be paid off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Number of months __

Answer 1

Number of Months: 27.50 Months

$14,840 = $620 x PVAF (1.02%, n years)

or, $23.9355 = PVAF (1.02%, n years)

or, n = 27.50 months

For better understanding see the table below:

Month	Amount	PVF @ 1.02%	Present Value
1	620	0.99	613.8
2	620	0.98	607.6
3	620	0.97	601.4
4	620	0.96	595.2
5	620	0.951	589.62
6	620	0.941	583.42
7	620	0.931	577.22
8	620	0.922	571.64
9	620	0.913	566.06
10	620	0.903	559.86
11	620	0.894	554.28
12	620	0.885	548.7
13	620	0.876	543.12
14	620	0.868	538.16
15	620	0.859	532.58
16	620	0.85	527
17	620	0.842	522.04
18	620	0.833	516.46
19	620	0.825	511.5
20	620	0.816	505.92
21	620	0.808	500.96
22	620	0.8	496
23	620	0.792	491.04
24	620	0.784	486.08
25	620	0.776	481.12
26	620	0.768	476.16
27	620	0.76	471.2
28	620	0.753	466.86
			15035