1) Student A has a credit balance of $20,000. The annual effective interest rate on the credit card is 20%. Student A takes out a home equity loan to pay off her credit card balance. The interest rate equity loan is 5%. Ignoring taxes, how much does this strategy save Student A, assuming she pays off the loan in full 18 months from now?

1) Student A has a credit balance of $20,000. The annual effective interest rate on the credit card is 20%. Student A takes out a home equity loan to pay off her credit card balance. The interest rate equity loan is 5%. Ignoring taxes, how much does this strategy save Student A, assuming she pays off the loan in full 18 months from now?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter6: Using Credit

Section: Chapter Questions

Problem 8FPE

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