9
QuizMultiple Choice

Paying Off Debt

Question 9 • Personal Finance - EL3403

Billy has a credit card with a current balance of $3,500 and a 16% APR. With his current monthly payment, he will be able to pay off this debt in 15 months. But Billy just learned that he is getting a raise at work. If he puts all of the extra income from his raise into his monthly credit card payment, how much additional monthly income would he require from his raise to pay off the credit card in 12 months?

Answer
A
$58.57
B
$171.37
C
$258.99
D
$317.56

Explanation

Use the fixed-payment loan formula with a monthly interest rate of 16% ÷ 12. Paying off $3,500 in 12 months requires a monthly payment of about $317.56; paying it off in 15 months requires about $258.99. The raise must cover the difference, $317.56 − $258.99 = $58.57 per month, so the additional income needed is $58.57.

AI-written and checked against the verified answer.

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