Credit Card Calculations
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1. Create an Excel spreadsheet that can do the calculations for the credit card below. Using formulas and the drag function of Excel (see the notes), find the values for 1 year of charges.
With a beginning balance of $1950 and no additional charges, you will just pay the minimum payment each month for the next year. The APR is 23.99% and the minimum payment each month is 4% of the balance. Determine the finance charge, new balance, and minimum payment required for each of the next year, and the starting balance for month 13:
a. What is the total of the minimum payments?
b. What is the total of the finance charges?
c. How much does the starting balance decrease after one year of payments?
d. The total of your finance charges is what percent of your total payments?
e. Explain why making the minimum payment all the time is great for the credit card company, but not so great for the user.
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Solution Summary
The Excel file contains all the computations, formulas and Excel functions used. The Word file summarizes the answers computed by Excel. The Word file contains over 140 words.
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Please refer to the Excel spreadsheet for the computations, formulas and Excel functions used. The Excel file shows the finance charge, new balance, and minimum payment required for each month, and the starting balance for month 13.
a. What is the total of the minimum payments?
From the Excel file, the total of the minimum payments is $839.57.
b. What is the ...
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- MSc, California State Polytechnic University, Pomona
- MBA, University of California, Riverside
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- BSc, California State Polytechnic University, Pomona
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