SOLUTION: Assume you have a balance of $3200 on your credit card that you want to pay off. Calculate your monthly payment and total payment under the given conditions. Assume you make no add

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Question 1164761: Assume you have a balance of $3200 on your credit card that you want to pay off. Calculate your monthly payment and total payment under the given conditions. Assume you make no additional charges to the card:
Find the savings plan balance after 7 months with an APR of 2% and monthly payments of $368.

Answer by Theo(13342) (Show Source):
You can put this solution on YOUR website!
the balance is 3200
the interest rate per year is 2% /12 = 2/12 percent per month.
your monthly payments are 368 dollars.
you can use a financial calculator to determine the remaining balance after 7 months.
use the calculator to figure out the number of months required to satisfy the balance.
the calculator tells you that the number of months to reduce the balance to 0 is 8.766577026.
after 7 months, you will have 1.766577826 months to reduce the loan to 0.
use the calculator again to figure out what the present value for those remaining 1.766577826 months are.
the calculator tells you that the present value is 648.6046819 dollars.
round this to the nearest penny and it's $648.60.
that's your remaining balance after 7 months.

i used the TI-BA-II financial calculator.

my inputs to this calculator were:

first pass:
present value = 3200
future value = 0
interest rate per month = 2/12 = .166666....%
payment at the end of each month = -368
calculator says number of months required to satisfy the remaining balance is 8.766577026.

second pass:
present value = 0
future value = 0
number of months = 8.766577026 minus 7 = 1.766577026
future value = 0
interest rate per month = 2/12 = .166666....%
payment at the end of each month = -368
calculator says present value = 648.6046819
round to nearest penny to get 648.60
that's the remaining balance after 7 months.

i also used excel to confirm these calculations were correct.
the results from excel are shown below:

the procedure for excel was:
the remaining balance of the previous month was multiplied by .02/12 to get the interest charged for the current month.
this interest was added to the remaining balance of the previous month.
the payment for the current month was then subtracted from the remaining balance of the previous month plus the interest charged for the remaining balance of the previous month to get the remaining balance of the current month.
the difference between the remaining balance of the previous month and the remaining balance of the current month was the accrued principle.

for example:
3200 is the remaining balance for the previous month.
the interest charged was .02/12 * 3200 = 5.33
the remaining balance for the current month was 3200 plus 5.33 minus 368 = 2837.33
the accrued principle was 3200 - 2837.33 = 362.67
in excel, the previous month in this example was n = 0 and the current month was n = 1

you can see from excel that the remaining balance when n = 7 is 648.60.
that's the same as was calculated using the TI-BA=II financial calculator.