Ade G. answered 05/12/22
Finance MBA with 15+ years' experience in Corporate Finance / Modeling
Payment required without selling her doll collection, using a financial calculator
Using a financial calculator to solve for the payment required to pay off this new balance at a 19% APR in the next 8 months
8N (Number of months to pay off loan)
1.5833 I/Y (This is the 19% APR divided by 12 to get the monthly interest rate)
-4,350 PV (This is the balance left after applying the money from the sale to her balance)
?? PMT (This is what we are solving for)
0 FV ( Her balance after all payments)
Her monthly payment is $583.20, which she cannot afford.
If Jennifer applies the proceeds from the sale of her doll collection to her credit card balance, she will be left with:
$4,350 - $2,000 = $2,350.
Again, using a financial calculator to solve for the payment required to pay off this new balance at a 19% APR in the next 8 months.
8N
1.5833 I/Y (This is the 19% APR divided by 12 to get the monthly interest rate)
-2,350 PV (This is the balance left after applying the money from the sale to her balance)
?? PMT (This is what we are solving for)
0 FV ( Her balance after all payments)
Solve for PMT, by CPT, PMT
we get $315.06.
This is the payment required to payoff her credit card balance after applying the proceeds from her doll collection in 8 months.
Her old payment was $583.20, her new payment is $315.06, so she has lowered her monthly payment by:
$583.20 - $315.06 = $268.14.