Question
}A bank charges Rs.2,500 for issuing a new credit card. In addition, it also charges yearly renewal fee of Rs.2,000. }The bank wants to give
}A bank charges Rs.2,500 for issuing a new credit card. In addition, it also charges yearly renewal fee of Rs.2,000. }The bank wants to give the credit card free (only the first year charges waived) during the Holi festival of 2018. }The customer cannot cancel the card during the next 5 years. About 50% of the customers are expected to cancel the card after 5 years. }An average customer spends Rs.50,000 each year. The bank earns 2.5% on every rupee spent by the customer. }The cost of funds of the bank is 10%. }Should it give the card free?
}The bank would have sold credit cards to about 10,000 customers in this period.
}However, because of this offer, an additional 10,000 customers will also apply for (and get) the credit card.
}Do these additional information change your answer in the previous slide?
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