1. Barra Moore’s credit card company requires a minimum monthly payment of $19.9
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Question
1. Barra Moore’s credit card company requires a minimum monthly payment of $19.99. The credit card company charges 21% annual interest. Barra owes $1,000 on this card.
a) If Barra only pays the minimum monthly payment without any additional purchases, how long will it take him to pay off the credit card? (Do not interpolate the tables; use the nearest figure given.)
b) How much will Barra end up paying the credit card company when the card is paid off?
2. Skip Town borrowed $20,000 at a rate of 12% compounded monthly. He was supposed to pay it back in 60 equal payments over the next 5 years. However, immediately after his 30th payment, Skip decided to pay off the balance. How much did he have to pay?
3. Wanda B. Rich is making $1,000 quarterly deposits into a fund that pays 8% interest compounded quarterly. What will the balance be in her account at the end of 10 years?
Explanation / Answer
1. It takes 50 Months to Barra to complete the payment of Credit Card amount owed.
2. Skip TOwn has to pay $10,000 as the Principal repayment and the interest calculated @12% for the last 30 Payments.
3. The formula for calculation of A = P(1+r/n)^n = 1000 (1+0.08/4)^4(10) = $2208.04
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