Question

If the average annual interest rate is 17.11%, how many months will it take the average American family to pay off their debt of $7,942 if they make a minimum payment of $175 each month and no additional purchases are made? months.

Answer 1

The payoff period will be 73.56 months if the average annual interest rate is 17.11%, how many months will it take the average American family to pay off their debt of $7,942

What is compound interest?

It is defined as the interest on the principal value or deposit and the interest which is gained on the principal value in the previous year.

We can calculate the compound interest using the below formula:

$\rm A = P(1+\dfrac{r}{n})^{nt}$

Where A = Final amount

          P = Principal amount

          r  = annual rate of interest

          n = how many times interest is compounded per year

          t = How long the money is deposited or borrowed (in years)

We have:

Loan amount = $7942, Monthy pay = $175, Interest rate = 17.11%

After calculating from the payment formula:

The payoff =  6.13 years = 73.56 months

Thus, the payoff period will be 73.56 months if the average annual interest rate is 17.11%, how many months will it take the average American family to pay off their debt of $7,942

Learn more about the compound interest here:

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