Question

Lysandra wants to take a two-week cruise with her romance partner in charge is $10,000 to her credit card. She knows that it will take three years to fully pay for the trip and her credit card charges 10.9% annual interest rate. What will be her monthly payment to the credit card company? U

Answer 1

Answer:

$326.44 (EMI method) or $368.61 (When interest is charged on principal amount)

Step-by-step explanation:

Total amount taken on credit by Lysandra = $10,000

Method 1 (When interest is charged on $10,000):

Interest rate = 10.9% p.a.

Thus, total interest payment for three years = $1,090×3 = $3,270

Total amount to be repaid (including interest) = $13,270

Monthly payment to credit card company = $13,270÷36 = $368.61

Method 2 (When interest is charged in $10,000 less amount repaid):

Interest rate = 10.9% p.a.

P = $10,000

$r=\frac{10.9}{12*100} =0.009\\n=3*12=36$

$EMI = \frac{P*r*(1+r)^n}{[(1+r)^n-1]}\\EMI = \frac{10,000*0.009*(1+0.009)^{36}}{[(1+0.009)^{36} -1]}\\EMI = \frac{10,000*0.009*(1.009)^{36}}{[(1.009)^{36}-1]}\\EMI = 326.44$

Monthly payment to credit card company = $326.44

Note: Method 2 is the more suitable answer considering the way the question is framed.