Question

A new employee charged $5080 on his credit card to relocate for his first job. Afternoticing that the interest rate for his balance was 21% compounded monthly, he stopped charging on that account. He wishes to pay off his balance in 3 years usingautomatic payments sent at the end of each month.a. What monthly payment must he make to pay off the account at the end of 3years?b. How much total interest will he have paid?a. What monthly payment must he make to pay off the account at the end of 3years?$(Round to the nearest cent as needed.)

Answer 1

Initial amount= $5080.

Interes rate=21%

The final quatity is given by:

$PMT=\frac{PV*i}{1-(1+i)^{-n}}$

Where,

PV= initial amount= $5080

i=rate of interest =21%

n= time in years =3 years

Replacing:

$\begin{gathered} A=\frac{5080*0.21}{1-(1+0.21)^{-3}} \\ A=279.66 \end{gathered}$

He has to pay $279.66 each month.

B) Total interest.

Final amount-initial amount:

$\begin{gathered} TotalInterest=279.66*(12*3)-5080= \\ =4987.76 \end{gathered}$

The total interest he had to pay is: $4987.76.