Caitlin has a balance of $4,880 on her credit card that has an APR of 16%. She currently pays the minimum monthly payment of $105.86. If Caitlin wants to pay off her balance in 20 months, determine the monthly payment she would need to make. Choose the following modification with the least cuts to her current expenses that will allow Caitlin to pay off her balance in 20 months.

a.

Caitlin can eliminate $100 from Food/Clothes and $85 from Entertainment.

b.

Caitlin can eliminate $62 from Food/Clothes and $49 from Entertainment.

c.

Caitlin can eliminate $54 from Food/Clothes and $120 from Entertainment.

d.

The minimum payment is enough to pay off the balance within 20 mo

Question

Mathematics

Donovan Townsend

11 September, 16:59

Caitlin has a balance of $4,880 on her credit card that has an APR of 16%. She currently pays the minimum monthly payment of $105.86. If Caitlin wants to pay off her balance in 20 months, determine the monthly payment she would need to make. Choose the following modification with the least cuts to her current expenses that will allow Caitlin to pay off her balance in 20 months.

a.

Caitlin can eliminate $100 from Food/Clothes and $85 from Entertainment.

b.

Caitlin can eliminate $62 from Food/Clothes and $49 from Entertainment.

c.

Caitlin can eliminate $54 from Food/Clothes and $120 from Entertainment.

d.

The minimum payment is enough to pay off the balance within 20 mo

+5

Answers (1)

Know the Answer?

Pierre Dawson · Answer 1

C. Caitlin can eliminate $54 from Food/Clothes and $120 from Entertainment.

Monthly Amortization to payoff balance

Amortization computation

A = [P (r (1+r) ^n) ] / ((1+r) ^n-1)

where:

P = $4880

r = APR/12

= 16%/12

= 1.33%

n = 20 months

A = $279.498

Amortization deficit = Required Amortization - Minimum amortization

Caitlin's Amortization deficit = $279.50-$105.86

= $173.64 round off to $174

c. $54 Food + $120 Entertainment = $174 deficit