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One of your customers is delinquent on his accounts payable balance. You’ve mutually agreed to a repayment schedule of $750 per month. You will charge 2.1 percent per month interest on the overdue balance. If the current balance is $20,000, how long will it take for the account to be paid off? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Respuesta :

Answer:

It will take 39.50 months for the account to be paid off.

Explanation:

As the amount is subject to interest so we will use annuity factor formulae to determine the period in which the balance will be zero. Please note that the installment of 750 dollars include both principal and interest payment. Detail calculation is given below.

Loan amount = Installment * (1 - (1+i%)^-n)/i%

20,000 = 750 * ((1-(1+2.1%)^-n)/2.1%)

1 - (20,000/750 * 2.1%)= (1+2.1%)^-n

Log 0.44 = -n Log (1.021)

N (period) = 39.5