Math Geek Question
posted in General |Let’s say, for sake of argument, that I have a $900 credit card bill. (this one, the whole thing is $900, not a monthly payment, mmkay?). I want to pay it off in 2007, and I want to pay it in even amounts over the course of the year. My first thought was “hmm, pay the remaining balance divided by the number of months left in the year.” And that works ok, except for compounded interest. Look at “try one” on this spreadsheet. The interest is calculated as 0.04*the remaining balance after the payment is made. The first column is how much the payment would be, how much interest I’d pay that month, and the remaining balance. The payment amount keeps going up!
Well, so much for that. So in my second attempt, I used the average of the interest gains and added it to the payment. The payment amounts go up a little bit (close enough for me) and then go down a little bit. That happens because my interest adjustment is the average of the interests, and some of them are below average and some above. But it doesn’t hit 0 in December. And the difference is enough that it doesn’t look like a rounding error to me. So… what gives? And I’m sure there’s a more mathematical approach to solve this; anyone care to share it?
