=+LG 6 P5–57 Loan rates of interest You have a credit card debt amounting to $50,000. The card charges you a 32% interest rate with monthly compounding. You believe that the interest rate of the existing debt is too high, so you decide to switch cards and move the outstanding balance on the old card to the new card. After doing some research, you find Cards A, B, and C as alternatives. If you move the existing debt to Card B or Card C, there will be extra charges (handling fees). Card B will charge $500, and Card C will charge $1,000 handling fees.

Card Interest rate Outstanding amount A 30% $50,000 B 29 50,500 C 28 51,000 Annuity Cost of annuity today Annual cash flow Life (years)

A $30,000 $3,100 20 B 25,000 3,900 10 C 40,000 4,200 15 D 35,000 4,000 12 Her decision will be based solely on the rate of return she will earn on each annuity.

The following table shows the key terms of the four annuities.