1. A recent graduate of the university has gotten into a little more credit card debt than they had anticipated. They currently owes $22,000; the credit card company charges 1.5% per month on this debt.
2. 1. If they wish to pay off this credit card bill in 5 years of equal monthly installments, promises to make the first payment next month and not use the credit card again, what monthly payments must they make? You may assume that there are no additional fees or charges related to the card, and that the credit card interest rate is not expected to change.
3. 2. The graduates parents hear of this plight. They offer to extend a loan to pay off the debt, with the interest rate charged equal to .6667% per month. The student wishes to know the incremental value of this new borrowing opportunity (relative to the credit card debt) today (so that he can go shopping.) That is, how much they can spend today and still have the same monthly payments as in part a). What can they spend on todays shopping trip?