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Essentials Of Investments
Essentials Of Investments
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
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When you use a credit card to purchase items, you borrow money from a credit card company. If you pay the money back by the due date each month, you are not charged for the service (unless your 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 called your 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 a variety 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. A person with a high credit score has good credit and will get a lower interest rate than someone with à 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 of 2009, 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 it quickly to get a general sense of the information without trying to understand every detail.) This information will be discussed in class in more detail. Annual Percentage Rate (APR) for Purchases APR for Balance Transfers APR for Cash Advances Interest Rates and Interest Charges Penalty APRS and When it Applies How to Avoid Paying Interest on Purchases Minimum Interest Charge 0.00% introductory APR for 6 months from the date of account opening. After that, your APR will be 10.99% to 23.99% based on your creditworthiness. This APR will vary with the market based on the Prime Rate. 0.00% introductory APR for 12 months after the first transaction posts to your account under this offer. After that your APR will be 10.99% to 23.99% based on your creditworthiness. This APR will vary with the market based on the Prime Rate. 28.99%. This APR will vary with the market based on the Prime Rate. Between up to 16.99% and up to 26.99% based on your creditworthiness and other factors. This APR will vary with the market based on the Prime Rate. This APR may be applied to new purchases and balance transfers on your account if you make a late payment. How long will the penalty APR apply? If your APRS for new purchases and balance transfers are increased for a late payment, the Penalty APR will apply indefinitely. Your due date is at least 25 days after the close of each billing period (at least 23 days for billing periods that begin in February). We will not charge you any interest on purchases if you pay your entire balance by the due date each month. If you are charged interest, the charge will be no 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.
Transcribed Image Text:When you use a credit card to purchase items, you borrow money from a credit card company. If you pay the money back by the due date each month, you are not charged for the service (unless your 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 called your 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 a variety 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. A person with a high credit score has good credit and will get a lower interest rate than someone with à 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 of 2009, 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 it quickly to get a general sense of the information without trying to understand every detail.) This information will be discussed in class in more detail. Annual Percentage Rate (APR) for Purchases APR for Balance Transfers APR for Cash Advances Interest Rates and Interest Charges Penalty APRS and When it Applies How to Avoid Paying Interest on Purchases Minimum Interest Charge 0.00% introductory APR for 6 months from the date of account opening. After that, your APR will be 10.99% to 23.99% based on your creditworthiness. This APR will vary with the market based on the Prime Rate. 0.00% introductory APR for 12 months after the first transaction posts to your account under this offer. After that your APR will be 10.99% to 23.99% based on your creditworthiness. This APR will vary with the market based on the Prime Rate. 28.99%. This APR will vary with the market based on the Prime Rate. Between up to 16.99% and up to 26.99% based on your creditworthiness and other factors. This APR will vary with the market based on the Prime Rate. This APR may be applied to new purchases and balance transfers on your account if you make a late payment. How long will the penalty APR apply? If your APRS for new purchases and balance transfers are increased for a late payment, the Penalty APR will apply indefinitely. Your due date is at least 25 days after the close of each billing period (at least 23 days for billing periods that begin in February). We will not charge you any interest on purchases if you pay your entire balance by the due date each month. If you are charged interest, the charge will be no 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 Applies How to Avoid Paying Interest on Purchases Minimum Interest Charge This APR may be applied to new purchases and balance transfers on your account if you make a late payment. How long will the penalty APR apply? If your APRS for new purchases and balance transfers are increased for a late payment, the Penalty APR will apply indefinitely. S Your due date is at least 25 days after the close of each billing period (at least 23 days for billing periods that begin in February). We will not charge you any interest on purchases if you pay your entire balance by the due date each month. If you are charged interest, the charge will be no 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 minimum charge for interest, in dollars, when customers pay interest?
Transcribed Image Text:Penalty APRS and When it Applies How to Avoid Paying Interest on Purchases Minimum Interest Charge This APR may be applied to new purchases and balance transfers on your account if you make a late payment. How long will the penalty APR apply? If your APRS for new purchases and balance transfers are increased for a late payment, the Penalty APR will apply indefinitely. S Your due date is at least 25 days after the close of each billing period (at least 23 days for billing periods that begin in February). We will not charge you any interest on purchases if you pay your entire balance by the due date each month. If you are charged interest, the charge will be no 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 minimum charge for interest, in dollars, when customers pay interest?
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