A person borrows $3,000 on a bank credit card at a nominal rate of 18% per year, which is actually charged at a rate of 1.5% per month. a. What is the annual percentage rate (APR) for the card? (See Example 5.6.8 for a definition of APR.) b. Assume that the person does not place any additional charges on the card and pays the bank $150 each month to pay off the loan. Let Bn be the balance owed on the card after n months. Find an explicit formula for Bn . c. How long will be required to pay off the debt? d. What is the total amount of money the person will have paid for the loan?

A person borrows $3,000 on a bank credit card at a nominal rate of 18% per year, which is actually charged at a rate of 1.5% per month. a. What is the annual percentage rate (APR) for the card? (See Example 5.6.8 for a definition of APR.) b. Assume that the person does not place any additional charges on the card and pays the bank $150 each month to pay off the loan. Let Bn be the balance owed on the card after n months. Find an explicit formula for Bn . c. How long will be required to pay off the debt? d. What is the total amount of money the person will have paid for the loan?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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