Math 1050 Credit Card Debt Assignment Osiris C- Garcia Perez

Name _________________________________ .

Y ha e ecei ed m n hl c edi ca d a emen and m n deal i h he financial eali ie f la m n h

birthday celebration. While your milestone in years was deserving of a celebration, dealing with the $1900 in credit card
charges will require some planning.

Your credit card statement lists the APR (Annual Percentage Rate) for your balance to be 13.5%. This is the yearly
interest rate the credit card company uses in calculating interest due on your balance. The credit card company
compounds interest monthly. Your monthly interest rate on credit card charges will be:

APR 0.135
i 0.01125
12 12

The minimum payment required by your credit card company is $25/month. Assuming that you do not make any new
charges to your account, answer the following questions to help you determine the best plan for paying off this credit
card debt.

T begin i h le check he lan f nl a ing he minim m am n d e each m n h T ge a feel f h

this will affect the balance, finish filling in the following table using the minimum monthly payment of $25.

Month Old Balance Interest Payment New Balance

1 $1900.00 $21.38 $25.00 $1896.38
2 $1896.38 $21.33 $25.00 $1892.71

3 $1892.71 $ 21.30 $25.00 $ 1889 .

01

4 $1889 . 01 5121.25 $25.00 $1885.26

5 $1885.26 $ 21.21 $25.00 $1881.47

6 $ 1881.47 $21.17 $25.00 $ 1877 . 64

7 $1877 - 64 $ 21 .
12 $25 . 00
$ 1873 -
76

8 $ 1873 .
76 $ 21.08 $25.00 $ 1869 .
84

9 $1869 .
84 $21 .
04 $25 - OO $ 1865 .
88

$
10 $1865 . 88 $20.99 $25.00 1861 . 87

11 $ 1861 .
87 $20 . 95 $25 - OO $1857 .
82

12 $ 1857 .
82 $ 20.90 $ 25.00 $1853 .
72

What is the total amount that has been paid to the credit card company at the end of the first year?

$300 ( $25 ×
121mm )
How much of the original balance has been paid off at the end of the first year?

$46.28 ( 1900 -

1853.72 )

From looking at the new balances over the first year, how many years do you think it will take to pay off the $1900?
(This is a guess so there is no wrong answer. Before going on to step 2, write down your best estimate.)

about 40 years
Math 1050 Credit Card Debt Assignment Osiris C- Garciaperez
Name _________________________________

2. A formula for calculating the payment, P , required to pay off a debt of amount D in M months with monthly
interest rate i is
D i
P M
1 1 i

Using this formula, solve for M to determine the number of months it will take to pay off the $1900 credit card debt
with minimum monthly payments of $25. Round the number of months to two decimal places. (Attach all work for this
assignment to the end.)

M =
172.61 Months

How long is this in years, rounded to the nearest tenth of a year?

14.4
years ( 172.61 ÷ 12
)
What is the total amount paid to the credit card company, rounded to the nearest dollar?

$4315 .
25 925×172.61 ) mo

3. How many months will be required to pay off the debt if you pay $50 each month? Round to two decimal places.
please refer to last pages

49.86 months
How long is this in years, rounded to the nearest tenth of a year?

4. 2 years ( 49.86 12 )
What is the total amount paid to the credit card company, rounded to the nearest dollar?

$2493 ( $50 x 4986 mo

)
4. How many months will be required to pay off the debt if you pay $75 each month? Round to two decimal places.
please refer to last pages

29.99 months

How long is this in years, rounded to the nearest tenth of a year?

2.5 years ( 29.99 ÷ 12 )

What is the total amount paid to the credit card company, rounded to the nearest dollar?

$2249 25
( $75 ×
29.99 )
.

mo
Math 1050 Credit Card Debt Assignment Osiris C- Garcia Panet
Name _________________________________

5. How large would your monthly payment have to be in order to pay off your debt in 12 months? Round up to the next
nearest cent. please refer to last pages .

would be :
Minimum payment

$170 . 15

What is the total amount paid to the credit card company, rounded to the nearest dollar?

$2041 ( $170.15
.
80 ×
12 mo )
6. What is the best plan for paying off the $1900? Why?
I personally believe that the best Plan is paying the debt of in 12 months .

The reason being ,

the debt will be paid off faster ,
and you are

simultaneously paying less interest for paying it off at the

faster pace .

What is the worst plan? Why?

The worst plan would have to be sticking to the minimum payment Of $25
In the twelve it would take
.

months you to pay the full amount in the

last example you would have 0h14 Paid roughly $47
minimum
,

Sticking to the
payment Plus you would be in debt
.

, for around
40 years .

What should you do if you cannot afford to make the payments required by the best plan?
If the best Plan is out of reach can stick to the $75
, you payment
Plan .

using that middle ground will allow YOU to lower the debt
while minimizing
,
also the amount that would be
only paid
towards the interest .

7. What are two things that the average consumer can learn by completing this assignment?

i. Larger monthly payments will allow revive

you to the amount of
debt faster while saving money in
,
the long run . Because you
won 't be interest
only paying towards .

ii. Most credit companies

provide the option minimum Payments
of small
,

in order for you to

stay in debt
longer
'

, essentially lose money

by paying towards only the interest .
So beware .
 -

P will be minimum payment 25 dollars

-

D is the amount Of debt 1900 dollars

-

i is the interest rate 0.01125

1900 •
0.01125
25 = -

M
(
-

I -

I to -01125 )

"
)
+0.04251 375
¥+0.011251 )
, 21 - m
y
µ
.

25
,

o,
= -
m

[I ]
M
25
-

( I +0.01125 ) =
21.375
-
-

25
25

21.37525
M
( )
-

I -
I t O -
01125 =

I
-

I
M
( It 0.01125 )
-

21.375
-

1- I
T E
-

I
-

I +0.01125 M
-

= 21.375
+1
-

Is

d. 01125 ]
[-21.375-+1]
-
M
In =
In
25

m.int In
(-21-2375-+1)
-
=

-
In 11.011251 -

In l l 01125
-
)

cont .
On next page .
 M In ( 1.01125 ) In
(-21-275-+1)
- - =

¥011251
¥011251

In C -21.31¥ + I
]
M =
-

-
In ( 1.01125 )

mt-172.co/00694J
 What if we paid $50 Monthly ? ( question 3 )
( we will Use the formula we ended up with in the last example )

M = -
In ( "fF
- ti
)
-

In ( 1.01125 )

M=49.85546629Y
What if we paid $75 monthly ? ( question 41

375
/ Ftl )
-
21 -

In
µg =

In ( 1.01125 )

14=29.98722221
What would the payment have to be to pay in 12 months ? ( question 5)

1900 •
0.01125
-

p = -
' Z

I -

(I to -01125 )

P =
21.375-0.1256252965
P =
170.1488521