Question

Isaac owes $8,100 on his credit card. The bank charges an annual interest rate of 21.9%, compounded monthly. If Isaac wants to pay off his credit card using equal monthly payments over the next 16 months, what would the monthly payment be, to the nearest dollar?

Answer 1

To calculate the monthly payment that Isaac needs to make to pay off his credit card debt in 16 months, we can use the formula for the monthly payment on a loan:

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

where:

P = monthly payment

PV = present value of the debt

r = monthly interest rate

n = number of monthly payments

First, we need to convert the annual interest rate to a monthly interest rate by dividing it by 12:

r = 0.219 / 12 = 0.01825

Next, we plug in the values we know into the formula:

P = (0.01825 * 8100) / (1 - (1 + 0.01825)^(-16))

P = $537.13

Therefore, Isaac would need to make monthly payments of $537 to pay off his credit card debt in 16 months, rounded to the nearest dollar.