the annual interest rate on a credit card is 24.99% if a payment of $100.00 is made each month, how long will it take to pay off an unpaid balance of $2,487.56?

Question

present value of an annuity? 

Answer 1

Usually, credit card companies calculate the interest, then subtract the payment.

 

So, the monthly interest rate will be 24.99% ÷ 12 = 2.0825% per month

In this case, for month 1, the interest would be $2,487.56 x 2.0825 = $51.80

The interest is then added to the loan amount, and then the payment is subtracted. Then, we have $2,487.56 + 51.80 - 100 = $2,439.36

 

At that rate, 34 months will be needed to repay the loan, with a final payment of $40.61