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18 April, 08:29

You have two options for credit cards. Option one offers a fixed annual percentage rate of 17%. Option two offers you an introductory annual percentage rate 10% for the first year increasing to 23% the second year. Each card offers you a $1,500 limit. In each of the first two years you reach your limit. Using simple interest, calculate the interest for both cards for the first two years. What is the difference in interest charges?

a) $15

b) $17

c) $23

d) $25

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Answers (2)
  1. 18 April, 09:21
    0
    Answer: A) $15

    Explanation:

    Option 1

    Fixed annual percentage rate=17% on $1,500

    17% of $1,500

    =17/100*$1,500

    =$255 per annum

    For two years at 17% each

    =$255*2

    =$510

    Option 2:

    Annual percentage for first year=10%

    10% of $1,500

    =10/100*$1,500

    =0.1*$1,500

    =$150

    Annual percentage for second year=23%

    =23% of $1,500

    =23/100*$1,500

    =$345

    For two years at 10% and 23% respectively

    =$150+$345

    =$495

    Difference in charges between the two card options = two years interest for option 1 card + two years interest for option two card

    =$510.00+$495.00

    = $15
  2. 18 April, 12:26
    0
    The difference in interest charges is:

    a) $15

    Explanation:

    Card 1:

    Interest Year 1 $1.500 x 17%=$255

    Interest Year 2 $1.500 x 17%=$255

    Total Interest = $510

    Card 2:

    Interest Year 1 $1.500 x 10% = $150

    Interest Year 2 $1.500 x23% = $345

    Total Interest = $495

    Difference

    $510-$495=$15
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