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Need help figuring why credit card companies offer interest rates on their cards which vary with the current yield on newly issued U.S. Treasury bills. If you want you can just give me a hint and point me give me an internet address where I can find the information myself. Thanks.

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Solution Summary

This solution explains why interest rates vary between credit cards and the yield on new US Treasury Bills.

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The reason that they are different if because financial institutions need to make money.

Let's generalize this problem so you know how to solve it under slightly different circumstances.

Let's say that we have two interest rates rb = rate of borrowing (for banks) and rl = rate of lending (in other words saving, or buying bonds).

In your specific ...

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