Need help on practice question When you use a credit card to purchase items, you borrow money from a credit card company. Ifyou pay the money back by the due date each month, you are not charged for the service (unlessyour card charges an annual fee). If you do not pay all of the money back at the end of the month,the company charges you interest on the amount that you do not pay off. This amount is calledyour balance. Interest is based on a percent of your balance. The annual interest rate is the APR(annual percentage rate.)Creditworthiness is a measure of the likelihood that you will pay your bills on time based on avariety of factors such as your history of repayment and the amount of debt you already have.Credit card companies use a credit score ranging from 300 to 850 to measure creditworthiness. Aperson with a high credit score has good credit and will get a lower interest rate than someone withà low credit score.Because it is important for people to understand how much credit cards charge, the U.S.government has a law called the Credit Card Accountability, Responsibility, and Disclosure Act of2009, which requires companies to publish information about rates and fees in a standard format.The standard format is a disclosure or the pricing and terms.The disclosure begins with a summary like the one shown below. Scan this form. (That is, read itquickly to get a general sense of the information without trying to understand every detail.) Thisinformation will be discussed in class in more detail.Annual Percentage Rate (APR) forPurchasesAPR for Balance TransfersAPR for Cash AdvancesInterest Rates and Interest ChargesPenalty APRS and When it AppliesHow to Avoid Paying Interest on PurchasesMinimum Interest Charge0.00% introductory APR for 6 months from thedate of account opening.After that, your APR will be 10.99% to 23.99%based on your creditworthiness. This APR willvary with the market based on the Prime Rate.0.00% introductory APR for 12 months after thefirst transaction posts to your account underthis offer.After that your APR will be 10.99% to 23.99%based on your creditworthiness. This APR willvary with the market based on the Prime Rate.28.99%. This APR will vary with the marketbased on the Prime Rate.Between up to 16.99% and up to 26.99%based on your creditworthiness and otherfactors.This APR will vary with the market based on thePrime Rate.This APR may be applied to new purchasesand balance transfers on your account if youmake a late payment.How long will the penalty APR apply? If yourAPRS for new purchases and balance transfersare increased for a late payment, the PenaltyAPR will apply indefinitely.Your due date is at least 25 days after the closeof each billing period (at least 23 days for billingperiods that begin in February). We will notcharge you any interest on purchases if youpay your entire balance by the due date eachmonth.If you are charged interest, the charge will beno less than $0.50.Use the disclosure summary and the website to answer the questions below.True or False: Everybody pays the same interest rate on credit cards. Penalty APRS and When it AppliesHow to Avoid Paying Interest on PurchasesMinimum Interest ChargeThis APR may be applied to new purchasesand balance transfers on your account if youmake a late payment.How long will the penalty APR apply? If yourAPRS for new purchases and balance transfersare increased for a late payment, the PenaltyAPR will apply indefinitely.SYour due date is at least 25 days after the closeof each billing period (at least 23 days for billingperiods that begin in February). We will notcharge you any interest on purchases if youpay your entire balance by the due date eachmonth.If you are charged interest, the charge will beno less than $0.50.Use the disclosure summary and the website to answer the questions below.This credit card company charges interest when customers carry a balance. What is the minimumcharge for interest, in dollars, when customers pay interest?

Credit card company often provide the credit facilities at a lower interest rate to those the credit…

Answered: Need help on practice qu

Need help on practice qu

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS