Answer :
Given
Credit card has a balance of $4700
An annual interest rate of 12%
Find
a) How much must you pay each month?
b) How much total interest will you pay?
Explanation
a) Here we use PMT ,
[tex]\frac{P\times(\frac{r}{n})}{1-(1+\frac{r}{n})^{-n\times t}}[/tex]here P = $4700
r = 12%
now , substitute the values ,
[tex]\begin{gathered} \frac{4700\times(\frac{12\%}{12})}{[1-(1+\frac{12\%}{12})^{-12\times2}]} \\ \\ \frac{4700\times(1\%)}{[1-(1+1\%)^{-24}]} \\ \\ \frac{47}{1-0.78756613} \\ \\ \frac{47}{0.21243387} \\ \\ 221.245322132\approx221.25 \end{gathered}[/tex]b) Total interest paid over 2 years = (monthly payment * total number of months in a year*time period ) - current balance of credit card
so ,
[tex]\begin{gathered} 221.25\times12\times2-4700 \\ 5310-4700 \\ 610 \end{gathered}[/tex]Final Answer
Hence ,
a) The monthly payments are approximately $ 221.25
b) The total interest paid over 2 years is $610
