June has a credit card balance of $4,350 that comes with a 19% APR. She would like to have the balance paid off in the next 8 months, but she is having trouble making the monthly payments required to do so. In order to lower her monthly payments, she decides to sell her porcelain doll collection for $2,000 to apply directly to her credit card balance. June still wants to pay off the balance in 8 months. By applying the doll money, how much has June lowered her minimum monthly payment?

Question

Mathematics

Burch

16 July, 15:23

June has a credit card balance of $4,350 that comes with a 19% APR. She would like to have the balance paid off in the next 8 months, but she is having trouble making the monthly payments required to do so. In order to lower her monthly payments, she decides to sell her porcelain doll collection for $2,000 to apply directly to her credit card balance. June still wants to pay off the balance in 8 months. By applying the doll money, how much has June lowered her minimum monthly payment?

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Answers (1)

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Stanley Holloway · Answer 1

Orginal credit card amortization (A1) = Principal[ (i (1+i) ^n) / (1+i) ^n-1]

where

Principal = $4350

i = 19%/12 = 1.583%

n = 8

A1 = $583.19

Following the same formula with reduced principal amount, P2 = 2350

A2=315.06

Subract A2 form A1 to get the difference

Difference = $268.13

June was able to decrease her amortization by $268.13 after paying off $2000 from the Principal amount.