You have a credit card with an APR of 24%. The minimum payment is 5% of the outstanding balance (but no less than $20). Suppose you have $2000 on the card and you decide to stop charging and pay it off using the minimum payment each month. Use a spreadsheet a. Now bring this down to determine when the card is paid off – what is the total amount you paid in interest?
To determine when the credit card will be paid off and calculate the total amount paid in interest, you can use a spreadsheet. Here's how you can set it up:
1. Open a spreadsheet program such as Microsoft Excel or Google Sheets.
2. Create four columns with the following headers: "Month," "Outstanding Balance," "Payment," and "Interest paid."
3. In the "Month" column, enter the numbers sequentially starting from 1 for each month.
4. In the "Outstanding Balance" column, enter the initial balance of $2000 in the first row (cell A2).
5. In the "Payment" column, enter the minimum payment amount as 5% of the outstanding balance, with a minimum of $20. You can use the formula "=MAX(0.05*previous_balance, 20)" to calculate the payment for each subsequent month. For the first row (cell B2), directly enter the formula: "=MAX(0.05*$B$2, 20)".
6. In the "Interest paid" column, calculate the interest paid for each month. The interest is calculated as the outstanding balance multiplied by the monthly interest rate (APR divided by 12). You can use the formula "=previous_balance*APR/12" to calculate the interest for each subsequent month. For the first row (cell C2), directly enter the formula: "=$B$2*0.24/12".
Now, you can drag the formulas for the "Payment" and "Interest paid" columns down to fill the subsequent rows until the outstanding balance reaches zero.
To determine when the card is paid off, look for the row where the outstanding balance becomes zero. The month number in that row will represent the number of months it took to pay off the card.
To calculate the total amount paid in interest, sum up all the values in the "Interest paid" column from the first row to the row where the outstanding balance becomes zero.
That's it! Now you can determine when the card is paid off and find the total amount paid in interest.