Module 4 Critical Thinking Assignment

Answer to Part A –
1. How many months will it take SUE to pay off her credit card debt –
Currently sue has the balance of $20,000 in her credit card and she is willing to make payment of $500 per month to finish off her dues and the rate of interest on credit card is 17.25%. Sue is willing to repay $20,000 which means it can be termed as future value, monthly payment of $500 which can be termed as PMT and interest rate of 17.25 per annum and this shall be used as below for finding out number of months to repay the dues.
    Particulars
    Working
    Future Value
    $20,000
    PMT
    $500
    Interest
    17.25
     
     
    Number of months
    NPER (B11/12, B10,0, -B9,) *12
    Number of months
    $54.80
     
     
    Number of months
    55months
2. Maximum amount SUE can spend on Car as not to exceed month budget of $550 per month –
Sue wants to purchase new car wherein she makes minimum monthly payment of $550 including principal and interest and the rate of interest on car is 4.5% per annum for the period of 36 months.
Here, as Sue is willing to pay monthly $550, PMT shall be $550, Number of months for repayment is 36 months hence NPER shall be 36 and interest rate of 4.5% per annum. We use the formula of Future value to find out the value of Car she can purchase.
    Particulars
    Working
    PMT
    $550
    Interest
    0.045
    Months
    36
     
     
    Maximum amount she can spend
    FV (B9/12, B10, -B8,0,)
    Maximum amount she can spend
    $21,156.35...