Name

Please answer the following questions on this paper, and attach supporting documents.

Suppose you have a credit card balance of $1000. Your current credit card has an annual interest rate of 18.9%, no annual fee, and you are billed each month.

1.

How much interest is charged in the first month?

2.

If you make no payments, how much do you owe in 1 year?

3.

In reality, there is a $35 penalty each month if you do not make a payment. If you make no payments in the first year, how much do you owe?

4.

You realize that you need to avoid this $35 penalty, and if you eliminate a few trips to Starbucks each month, you can afford to pay $15 a month. Now how much do you owe after 1 year?

After 5 years?

At this rate when will you ever pay it off?

5.

You got a $0.20/hr raise at your part-time job (big deal), and you decided to put the extra $10 towards your credit card bill each month. Now that you are making $25 payments each month how much do you owe after 1 year?


After 5 years?


At this rate when will you ever pay it off?

Extra Credit

Assume another credit card company offers 17.9% interest, but there is a $20 annual fee. Is it better to stay with your current credit card company, or change to the new one?

What if you go on a spending spree and increase your balance to $2000, should you change companies?