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PROJECT 4: CREDIT CARD DEBT

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Question;The Problem;You will investigate what happens when you pay off a credit card;debt by paying only the minimum payment each month.;Assumptions;We will assume that the credit card company uses the Adjusted;Balance Method. This means that each month begins with an outstanding balance;which is the money that you still owe. At the beginning of the next month, the;new balance is computed using the following formula.;new balance = outstanding balance -payment + financial;charge;We will also assume that;while you are paying on this credit card debt, you do not make any additional;charges on the card.;Data;The outstanding balance on;your credit card is currently $1000.;The financial charge is;calculated as simple interest at 1:5% per month.;The minimum monthly;payment is either 2% of the outstanding balance or $10, whichever is greater.;Model;Follow these directions to create a spreadsheet to determine how;much money you owe after each month.;(a) Set up a spreadsheet with the same format as the one we;constructed in class. Wrap text in cells when appropriate. Before you enter any;numbers or formulas, your spreadsheet should look like:::these are the blocks;for the spread sheet;A B C D E F;1 Your Name;2. Initial balance Interest rate min. payment % min. payment $;3;4 month outstanding balance payment remaining finance;charge new balance;5 1;6 2;7 3;(b) Fill in the appropriate numbers in row 3 (the same ones as;in class).;(c) Enter the appropriate formulas in the other cells (using the;same formulas as in class). The only cells in which you should be entering;numbers rather than formulas are those in row 3, and possibly those in column;A. Every other blank cell must be filled with a formula.;(d) Drag your formula cells down until your new balance is zero;or a negative number. (You will have to go a LONG way down.);(e) Drag your month number cells down until you reach the month;in which the new balance is zero or negative.;(f) Format your cells to display numbers as currency or percents;where appropriate.;(g) Change your payment in the last row (where the new balance;is zero or negative) so that it is equal to the outstanding balance (because;you don't want to pay more than what you owe for the last payment).;(h) Use the sum function to add all of the monthly;financial charges together.;(For example, if you wanted to add up all of the numbers in;cells E5, E6,E7,:::, E59, E60, you would enter =sum(E5:E60) in a blank cell).;Use an adjacent cell to give a name to what your sum represents.;(i) Type Ctrl +~ on your keyboard to display the formulas in;your spreadsheet. (The ~ key is to the left of 1 on the keyboard.);(j) Print the first and last pages only of your;spreadsheet. Use landscape orientation and display the grid lines. Also adjust;column widths appropriately so that all of your columns fit across a;single page.;Interpret the Spreadsheet;(1) If you only make the minimum payment every month, how much;will you pay the credit card company in finance charges to pay off your;total $1000 debt?;(2) How long will it take to pay off your debt if you only pay;the minimum payment each month? Give your answer as a number of years plus the;number of months in the remaining partial year.;(3) In class, we used a linear model to predict that it would;take approximately 16 years and 8 months to pay off the debt. You should have;found a different answers using your spread sheet model. Explain why these two;models produce different answers.;Do not do any research on the internet or elsewhere for this;project.;Important Details;Your submission will;consist of two pages of your spreadsheet (the first and last, with;landscape orientation, gridlines displayed, all columns fitting across one;page, and formulas displayed) followed by an additional page in which you;answer the questions in the Interpret the Spreadsheet section

 

Paper#51757 | Written in 18-Jul-2015

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