Your credit card has a balance of $5400 and an annual interest rate of 18% You decide to pay off the balance over three years. If there are no further purchases charged to the card.
To calculate the monthly payments needed to pay off the balance over three years, we first need to calculate the total amount of interest that will accrue over that time period.
Since the annual interest rate is 18%, the monthly interest rate would be 18% / 12 = 1.5%.
First, we calculate the total interest over three years:
Total Balance = $5400
Total Interest = Total Balance * Annual Interest Rate * Number of Years
Total Interest = $5400 * 0.18 * 3 = $2916
Now, we need to calculate the total amount to be paid over three years:
Total Payment = Total Balance + Total Interest
Total Payment = $5400 + $2916 = $8316
Finally, we calculate the monthly payments needed to pay off the balance over three years:
Number of Months = Number of Years * 12
Number of Months = 3 * 12 = 36
Monthly Payment = Total Payment / Number of Months
Monthly Payment = $8316 / 36 = $231
Therefore, you will need to make monthly payments of $231 to pay off the balance of $5400 over three years without making any further purchases.