You have $3,500 on a credit card that charges a 13% interest rate. If you want to pay off the credit card in 4 years, how much will you need to pay each month (assuming you don't charge anything new to the card)?

Final answer:

To pay off your credit card debt of $3,500 at 13% interest rate in 4 years, you will have to calculate the monthly payments by using a certain formula. After defining the parameters (monthly payment, monthly interest rate, present value or current loan amount, and time), all you have to do is put the values in it and calculate the monthly payment.

Explanation:

This question refers to a financial problem in the subject of Mathematics, particularly pertaining to the concept of

simple interest

. To find out how much you need to pay each month to clear out your credit card debt, you would need to understand how the 13% interest is applied to your debt of $3,500. The formula for finding monthly payments is

P = [r*PV(1 + r)^t]/[(1 + r)^t – 1]

, where:

• P is your monthly payment,
• r is your monthly interest rate, calculated by taking your annual rate (0.13 in this case) and dividing it by 12,
• PV is your present value or current loan amount, which is $3500 in this case, and
• t is time, the number of periods in which payments will be made, which is 4*12 = 48 months in this case.

After defining the parameters, all you have to do is put the values in the formula and calculate the monthly payment.

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Final answer:

To calculate the monthly payments on a credit card debt of $3,500 with a 13% interest rate over 4 years, you can use the formula for calculating the monthly payment on a fixed-rate loan. The monthly payment comes out to be approximately $94.78.

Explanation:

To calculate the monthly payments on a credit card debt, you can use the formula for calculating the monthly payment on a fixed-rate loan. The formula is:

Monthly Payment = (Principal * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Number of Months))

In this case, the principal is $3,500, the monthly interest rate is 13% divided by 12 (0.13/12), and the number of months is 4 years multiplied by 12 months (4 * 12). Plugging in these values, we get:

Monthly Payment = (3500 * 0.13/12) / (1 - (1 + 0.13/12)^(-4 * 12))

Solving this equation will give us the monthly payment amount. Using a calculator, the monthly payment comes out to be approximately $94.78.

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