How long will it take Kate to pay for her furniture set if she chooses to payonly the minimum monthly payment of 2% of the outstanding balance? Her furniture set cost $3,750 financed at 19 3/4% annual interest.

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Truthfully, if Kate always pays only 2% of the balance, she will NEVER pay 100% of the balance or payoff her furniture.

You can use a spreadsheet to calculate the monthly payments and balances.

each month the previous month's balance is charged interest 1.1975^(1/12)=1.015133033

then 2% is paid and deducted from the balance.

the next month the remainder is charged interest and 2% is paid and so on.

The first few rows will look like this:

Balance Balance

before after

month payment payment payment

0 $3,750.00

1 $3,806.75 $76.13 $3,730.61

2 $3,787.07 $75.74 $3,711.33

3 $3,767.49 $75.35 $3,692.14

4 $3,748.02 $74.96 $3,673.05

5 $3,728.64 $74.57 $3,654.07

6 $3,709.36 $74.19 $3,635.18

7 $3,690.19 $73.80 $3,616.38

8 $3,671.11 $73.42 $3,597.69

9 $3,652.13 $73.04 $3,579.09

10 $3,633.25 $72.67 $3,560.59

before after

month payment payment payment

0 $3,750.00

1 $3,806.75 $76.13 $3,730.61

2 $3,787.07 $75.74 $3,711.33

3 $3,767.49 $75.35 $3,692.14

4 $3,748.02 $74.96 $3,673.05

5 $3,728.64 $74.57 $3,654.07

6 $3,709.36 $74.19 $3,635.18

7 $3,690.19 $73.80 $3,616.38

8 $3,671.11 $73.42 $3,597.69

9 $3,652.13 $73.04 $3,579.09

10 $3,633.25 $72.67 $3,560.59

After 936 payments (78 years) the balance will be $29.32