A recent graduate of the university has gotten into a little more credit card debt than...

  

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A recent graduate of the university has gotten into a little more credit card debt than he had anticipated. He currently owes $22,000; the credit card company charges him 1.5% per month on this debt. If he wishes to pay off his credit card bill in 5 years of equal monthly installments, promises to make the first payment next month and not use the credit card again, what monthly payments must he make? You may assume that there are no additional fees or charges related to the card, and that the credit card interest rate is not expected to change. a) b) After solving for the payment in a), the graduate realizes that he can't afford the first payments, given the salary of his new job. He wishes his payment to start small, then increase; the first payment will still come in one month's time. If he wishes his payments to grow at, say, 0.50% per month and still let him pay off the credit card debt in 5 years of monthly payments, what must the first payment be? The graduate's parents hear of his plight. They offer to extend him a loan to pay off the debt, with the interest rate charged equal to 8% per year, compounded monthly. The student wishes to know the incremental value of this new borrowing opportunity (relative to the credit card debt) today (so that he can go shopping.) That is, he wishes to know how much he can spend today and still have the same monthly payments as in p art a). What can he spend on today's shopping trip? c) A recent graduate of the university has gotten into a little more credit card debt than he had anticipated. He currently owes $22,000; the credit card company charges him 1.5% per month on this debt. If he wishes to pay off his credit card bill in 5 years of equal monthly installments, promises to make the first payment next month and not use the credit card again, what monthly payments must he make? You may assume that there are no additional fees or charges related to the card, and that the credit card interest rate is not expected to change. a) b) After solving for the payment in a), the graduate realizes that he can't afford the first payments, given the salary of his new job. He wishes his payment to start small, then increase; the first payment will still come in one month's time. If he wishes his payments to grow at, say, 0.50% per month and still let him pay off the credit card debt in 5 years of monthly payments, what must the first payment be? The graduate's parents hear of his plight. They offer to extend him a loan to pay off the debt, with the interest rate charged equal to 8% per year, compounded monthly. The student wishes to know the incremental value of this new borrowing opportunity (relative to the credit card debt) today (so that he can go shopping.) That is, he wishes to know how much he can spend today and still have the same monthly payments as in p art a). What can he spend on today's shopping trip? c)

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a of Lo an mo nthly Payments annuity value Pv of 3D monthly Payment Inter... View the full answer