Question

Suppose that you are a member of the typical American household and your family carries a credit card debt of
$7942. Use the TVM (Time-Value-of-Money) Solver to model a few credit card scenarios. (Note: Use months
rounded to the nearest hundredths on all calculations.)
1. If the average annual interest rate is 17.11%, how many months will it take the average American family
to pay off their debt of $7,942 if they make a minimum payment of $175 each month and no additional
purchases are made?
2. How much interest did you pay during this time?

Answer 1

1. At an annual interest rate of 17.11%, an average family needs 74 months to settle $7,942 at a $175 monthly payment.

2. The total interest is $4,932.10.

What is a monthly payment?

The monthly payment is the amount paid each month to settle the loan within its maturity period.

The monthly payment can be computed using an online finance calculator.

We can also determine the period of payment using the same online finance calculator as below.

Data and Calculations:

I/Y (Interest per year) = 17.11%

PV (Present Value) = $7,942

PMT (Periodic Payment) = $-175

FV (Future Value) = $0

Results:

N = 73.566

Sum of all periodic payments = $12,874.10

Total Interest = $4,932.10

Thus, while it will take 74 months for the average American family to pay off the loan of $7,942 with a monthly payment of $175 at 17.11% interest, the total interest paid is $4,932.10.

Learn more about periodic payments at https://brainly.com/question/24244579

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