1. Frank is 21 and has his first credit card with a monthly APR of 1.5%. He went on a shopping spree the first month and now has a balance of $1,000. Budget-wise, it would be nice if he could just pay the minimum payment of $40 each month until he graduates in five months. (LO 5-1)

a. How much of Frank’s first minimum payment of

$40 goes toward interest and what percentage goes toward reducing the principal?

b. What is Frank’s APR (annual percentage rate)?

c. Frank missed two payments and his default rate of 36% APR kicks in. What is his monthly percentage rate now? (LO 5-2)