2. On another credit card you have a balance of $3000.00 with an interest rate of 1% per month on the unpaid balance. The minimum payment each month is the interest for the month PLUS 2% of the unpaid balance. So every month if you make the minimum payment you cover the 1% interest and the principal balance decreases by 2%. You decide to make no further purchases on this credit card and make the minimum payment each month for four months. How much will you have paid down the principal balance at the end of four months?

2. On another credit card you have a balance of $3000.00 with an interest rate of 1% per month on the unpaid balance. The minimum payment each month is the interest for the month PLUS 2% of the unpaid balance. So every month if you make the minimum payment you cover the 1% interest and the principal balance decreases by 2%. You decide to make no further purchases on this credit card and make the minimum payment each month for four months. How much will you have paid down the principal balance at the end of four months?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter22: Providing And Obtaining Credit

Section: Chapter Questions

Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...

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Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
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