The scenario:You have purchased a computer for $2000 on a credit card. The card
ID: 3137908 • Letter: T
Question
The scenario:You have purchased a computer for $2000 on a credit card. The card charges 1.5% interest per month, and requires a minimum payment of 2.5% of the balance per month.
Payoff strategy 1: Each month, pay the minimum.
What will your balance owed be in 12 months?
How much will you have paid in 12 months?
How much of that is interest?
How many months will it take to reach a balance of $100? (Using this strategy, you can't ever get to $0)
When you have reached a balance of $100, how much will you have paid in interest?
There are various strategies to calculate these values: e.g. Excel spreadsheet, formulas, search the internet.
Payoff strategy 2: Each month, pay $100.
What will your balance owed be in 12 months?
How much will you have paid in 12 months?
How much of that is interest?
How many months will it take reach a balance of $0?
When you reach a balance of $0, how much will you have paid in interest?
Explanation / Answer
Payoff Strategy 1 -
Answers -
in 12 month 1263.71 - will be balance owed.
In 12 month 945.36 would have been already paid
in 12 month - out of 945.36 paid - 209.07 is interest paid
It will take 75 month to reach a balance of $100
by the time, it reach balance $ 100 - interest would have been paid - $ 500.86
Below is the table for payment
Payoff strategy 2
in 12 month balance would be - $ 996.56
in 12 month payment would be done of $1200
in 12 month interest would be $196.56
It will take 23 month to reach balance of $0
by the time when balance reach 0 the interest would have paid by $255.14
Below is the table for complete payment schedule
Month Previous Balance Minimum payment Interest per month New Balance 1 2,000.00 50.00 30.00 1980.00 2 1,980.00 99.00 19.80 1900.80 3 1,900.80 95.04 19.01 1824.77 4 1,824.77 91.24 18.25 1751.78 5 1,751.78 87.59 17.52 1681.71 6 1,681.71 84.09 16.82 1614.44 7 1,614.44 80.72 16.14 1549.86 8 1,549.86 77.49 15.50 1487.87 9 1,487.87 74.39 14.88 1428.35 10 1,428.35 71.42 14.28 1371.22 11 1,371.22 68.56 13.71 1316.37 12 1,316.37 65.82 13.16 1263.71 13 1,263.71 63.19 12.64 1213.17 14 1,213.17 60.66 12.13 1164.64 15 1,164.64 58.23 11.65 1118.05 16 1,118.05 55.90 11.18 1073.33 17 1,073.33 53.67 10.73 1030.40 18 1,030.40 51.52 10.30 989.18 19 989.18 49.46 9.89 949.61 20 949.61 47.48 9.50 911.63 21 911.63 45.58 9.12 875.16 22 875.16 43.76 8.75 840.16 23 840.16 42.01 8.40 806.55 24 806.55 40.33 8.07 774.29 25 774.29 38.71 7.74 743.32 26 743.32 37.17 7.43 713.59 27 713.59 35.68 7.14 685.04 28 685.04 34.25 6.85 657.64 29 657.64 32.88 6.58 631.33 30 631.33 31.57 6.31 606.08 31 606.08 30.30 6.06 581.84 32 581.84 29.09 5.82 558.56 33 558.56 27.93 5.59 536.22 34 536.22 26.81 5.36 514.77 35 514.77 25.74 5.15 494.18 36 494.18 24.71 4.94 474.41 37 474.41 23.72 4.74 455.44 38 455.44 22.77 4.55 437.22 39 437.22 21.86 4.37 419.73 40 419.73 20.99 4.20 402.94 41 402.94 20.15 4.03 386.82 42 386.82 19.34 3.87 371.35 43 371.35 18.57 3.71 356.50 44 356.50 17.82 3.56 342.24 45 342.24 17.11 3.42 328.55 46 328.55 16.43 3.29 315.41 47 315.41 15.77 3.15 302.79 48 302.79 15.14 3.03 290.68 49 290.68 14.53 2.91 279.05 50 279.05 13.95 2.79 267.89 51 267.89 13.39 2.68 257.17 52 257.17 12.86 2.57 246.89 53 246.89 12.34 2.47 237.01 54 237.01 11.85 2.37 227.53 55 227.53 11.38 2.28 218.43 56 218.43 10.92 2.18 209.69 57 209.69 10.48 2.10 201.30 58 201.30 10.07 2.01 193.25 59 193.25 9.66 1.93 185.52 60 185.52 9.28 1.86 178.10 61 178.10 8.91 1.78 170.98 62 170.98 8.55 1.71 164.14 63 164.14 8.21 1.64 157.57 64 157.57 7.88 1.58 151.27 65 151.27 7.56 1.51 145.22 66 145.22 7.26 1.45 139.41 67 139.41 6.97 1.39 133.83 68 133.83 6.69 1.34 128.48 69 128.48 6.42 1.28 123.34 70 123.34 6.17 1.23 118.41 71 118.41 5.92 1.18 113.67 72 113.67 5.68 1.14 109.12 73 109.12 5.46 1.09 104.76 74 104.76 5.24 1.05 100.57 75 100.57 5.03 1.01 96.55Related Questions
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