What monthly payment is required over the next 48 months to pay off a $10,000 debt today, if interest is charged at 14% per year, compounded monthly?
Click on the arrows to vote for the correct answer
A. B. C. D. E.D
On the BAII Plus, press 48 N, 14 divide 12 = I/Y, 10000 PV, 0 FV, CPT PMT. On the HP12C, press 48 n, 14 ENTER 12 divide i, 10000 PV, 0 FV, PMT. Make sure the BAII Plus has the P/Y value set to 1.
To calculate the monthly payment required to pay off a debt, we can use the formula for the monthly payment on a loan:
PMT = (P * r * (1 + r)^n) / ((1 + r)^n - 1)
Where: PMT = Monthly payment P = Principal amount (initial debt) r = Monthly interest rate n = Total number of months
In this case, the principal amount is $10,000, the interest rate is 14% per year (or 0.14/12 = 0.01167 per month), and the total number of months is 48.
Substituting the values into the formula, we get:
PMT = (10000 * 0.01167 * (1 + 0.01167)^48) / ((1 + 0.01167)^48 - 1)
Calculating this expression will give us the monthly payment required to pay off the debt.
Using a calculator or spreadsheet, the result is approximately $273.26.
Therefore, the correct answer is D. $273.26.