# You are a CFA (chartered financial analyst). An overextended client has come to you because she needs help paying off her credit card bills. She owes the amounts on her credit cards listed in the file P04_100.xlsx. The client is willing to allocate up to \$6000 per month to pay off these credit cards. All cards must be paid off within 36 months. The client’s goal is to minimize the total of all her payments. To solve this problem, you must understand how interest on a loan works. To illustrate, suppose the client pays \$5000 on Saks during month 1. Then her Saks balance at the beginning of month 2 is \$20,000 − [\$5000 − 0.005(20,000)]. This follows because she incurs 0.005(20,000) in interest charges on her Saks card during month 1. Help the client solve her problem. After you have solved this problem, give an intuitive explanation of the solution found by Solver.

### Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

### Practical Management Science

6th Edition
WINSTON + 1 other
Publisher: Cengage,
ISBN: 9781337406659

#### Solutions

Chapter
Section
Chapter 4, Problem 100P
Textbook Problem

## You are a CFA (chartered financial analyst). An overextended client has come to you because she needs help paying off her credit card bills. She owes the amounts on her credit cards listed in the file P04_100.xlsx. The client is willing to allocate up to \$6000 per month to pay off these credit cards. All cards must be paid off within 36 months. The client’s goal is to minimize the total of all her payments. To solve this problem, you must understand how interest on a loan works. To illustrate, suppose the client pays \$5000 on Saks during month 1. Then her Saks balance at the beginning of month 2 is \$20,000 − [\$5000 − 0.005(20,000)]. This follows because she incurs 0.005(20,000) in interest charges on her Saks card during month 1. Help the client solve her problem. After you have solved this problem, give an intuitive explanation of the solution found by Solver.

Expert Solution
Summary Introduction

To help: The client in making a decision for the given problem.

Linear programming:

It is a mathematical modeling procedure where a linear function is maximized or minimized subject to certain constraints. This method is widely useful in making a quantitative analysis which is essential for making important business decisions.

### Explanation of Solution

Model:

Solver input:

The solver input is selected from under the “Data” tab in Excel and the input is given as shown below:

Formula:

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