Suppose You Have a $4,200 Balance on a Credit Card

question 34

Multiple Choice

Suppose you have a $4,200 balance on a credit card with an interest rate of 1.26% per month, and
The minimum payment for any month is the amount of interest plus 1% of the principal balance. You
Find that if you don't make any more purchases on that card and make the minimum payment for 6
Months, you will have reduced your principle by $245.78. If the credit card company instead sets its
Minimum payment at interest plus 3% of the principal balance, how much more progress would you
Make after making minimum payments for 6 months?

• A)$455.74
• B)$487.64
• C)$587.90
• D)$701.52

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Definitions:

Operations

The day-to-day activities involved in the running of a business or production of goods and services.

Investment Center

A business segment or unit within an organization for which the manager has control and is responsible for its revenue, expenses, and the assets invested in the center.

Return On Investment

A performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of a number of different investments.

Residual Income

The amount of income that exceeds the minimum target return, often used in performance measurement and managerial compensation.