You have an unpaid balance of $100 on a credit card and plan to pay off the balance in 12 months. Your credit card company charges you 9% interest per year. You transfer the balance to a card that charges only 7% per year and plan to pay off the balance in 6 months. Use the table in Figure 25.1 to calculate the difference in the total charge for interest.
You have an unpaid balance of $100 on a credit card and plan to pay off the balance in 12 months. Your credit card company charges you 9% interest per year. You transfer the balance to a card that charges only 7% per year and plan to pay off the balance in 6 months. Use the table in Figure 25.1 to calculate the difference in the total charge for interest.
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 15P
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Question
You have an unpaid balance of $100 on a credit card and plan to pay off the balance in 12 months. Your credit card company charges you 9% interest per year. You transfer the balance to a card that charges only
7% per year and plan to pay off the balance in 6 months. Use the table in Figure 25.1 to calculate the difference in the total charge for interest.
![Figure 25.1- Annual Percentage Rate for Monthly Payments
Finance Charge per $100 Borrowed at Various Interest Rates
Number of Monthly
7.0%
7.5%
8.0%
8.5%
9.0%
Payments
6
$2.05
$2.20
$2.35
$2.49
$2.64
12
$3.83
$4.11
$4.39
$4.66
$4.94
18
$5.63
$6.04
$6.45
$6.86
$7.28
24
$7.45
$8.00
$8.55
$9.09
$9.64
30
$9.30
$9.98
$10.66
$11.35
$12.04](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F34987530-27ea-4bdc-96e9-37ad3341c5c3%2Ff32e4ee2-49c9-400e-987e-8a7885684e62%2F7l7p5msl_processed.png&w=3840&q=75)
Transcribed Image Text:Figure 25.1- Annual Percentage Rate for Monthly Payments
Finance Charge per $100 Borrowed at Various Interest Rates
Number of Monthly
7.0%
7.5%
8.0%
8.5%
9.0%
Payments
6
$2.05
$2.20
$2.35
$2.49
$2.64
12
$3.83
$4.11
$4.39
$4.66
$4.94
18
$5.63
$6.04
$6.45
$6.86
$7.28
24
$7.45
$8.00
$8.55
$9.09
$9.64
30
$9.30
$9.98
$10.66
$11.35
$12.04
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