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Jim Norton, an engineering junior, was mailed two guaranteed line-of-credit applications from two different banks. Each bank offered a different annual fee and finance charge.
Jim expects his average monthly balance after payment to the bank to be \$300 and plans to keep the credit card he chooses for only 24 months. (After graduation, he will apply for a new card.) Jims interest rate on his savings account is 6% compounded daily. The following table lists the terms of each bank:

Terms

Bank A

Bank B

Annual fee

\$20

\$30

Finance charge

1.55%

16.5%

monthly interest rate

annual percentage rate

(a) Compute the effective annual interest rate for each card.
(b) Which banks credit card should Jim choose?
(c) Suppose Jim decided to go with Bank B and used the card for one year. The balance after one year is \$1,500. If he makes just a minimum payment each month (say, 5% of the unpaid balance), how long will it take to pay off the card debt? Assume that he will not make any new purchases on the card until he pays off the debt.
Jim expects his average monthly balance after payment to the bank to be \$300 and plans to keep the credit card he chooses for only 24 months. Jims interest rate on his savings account is 6% compounded daily….

e effective annual interest rate for card of bank A is 18.6 1.05 = 17.55 percent and for bank B, it is 16.5 1.05 = 15.45 percent

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