One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $580 per month. You will charge 0.98 percent per month interest on the overdue balance. What is the initial overdue balance? (a) $59,183.67
(b) $61,198.54
(c) $57,467.53
(d) $63,720.52

Question

One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $580 per month. You will charge 0.98 percent per month interest on the overdue balance. What is the initial overdue balance? (a) $59,183.67
(b) $61,198.54
(c) $57,467.53
(d) $63,720.52

Accepted Answer

Final answer:The initial overdue balance with a monthly payment of $580 and a monthly interest rate of 0.98% is closest to $59,183.67, which can be calculated using the present value formula for annuities.So, the correct option is (a) $59,183.67.Explanation:The question pertains to determining the initial overdue balance on which the monthly interest is applied. To calculate the initial overdue balance, you can use the formula for the payment of an annuity: PV = PMT / i, where PV is the present value or initial amount, PMT is the monthly payment, and i is the monthly interest rate.In this case, the monthly payment (PMT) is $580, and the monthly interest rate (i) is 0.98%, or 0.0098 in decimal form. Plugging these values into the formula, we find that PV = $580 / 0.0098. This calculation results in an initial overdue balance that is closest to $59,183.67....

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Solved:

One of your customers is delinquent on his accounts payable balance. You've mutually agreed to a repayment schedule of $580 per month. You will charge 0.98 percent per month interest on the overdue balance. What is the initial overdue balance?