Michael has a credit card debt of $60,000 that has a 10% APR, compounded monthly. The minimum monthly payment only requires him to pay the interest on his debt. He receives an offer for a credit card with an APR of 9% compounded monthly. If he rolls over his debt onto this card and makes the same monthly payment as before, how long will it take him to pay off his credit card debt?
A) 298 months
B) 299 months
C) 306 months
D) 308 months

Question

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D) The first step is to calculate the minimum monthly payment using the debt balance of $60,000 and 10% APR compounded monthly, 11ea84dc_f573_5829_9a63_61e165e7a9b1_TB1316_11_TB1316_11 The second step is to use the same $500 as payment, and using a discount rate of 9%/12, calculate the number of months required to pay off the present value (PV) of $60,000, 11ea84dc_f573_582a_9a63_c7892ecb0fdf_TB1316_11_TB1316_11

Michael Has a Credit Card Debt of $60,000 That Has