Overview Credit cards allow the holder to make purchases without cash or when funds are not immediately available. The holder promises to pay at a future time. In exchange for this convenience and this trust, interest-an amount paid at a particular rate for borrowed money-is generally charged. You will explore the lengths of time needed to pay off a credit card in this project. Part 1 Select a credit card initial balance to use for this project. Look up your credit card balance or think of a time when you had a credit card balance. If you do not have a credit card, use your favorite internet search engine to quickly find the average credit card balance of a college student. For a meaningful investigation, make sure to select a credit card balance of at least $500 and no more than $6,000. What initial credit card balance do you select for this project? $ 1,200 For the duration of this project, assume that this balance is from the beginning of the month, you will make no new charges to the card, and the series of payments is considered an ordinary annuity. Part 2 Suppose that your credit card's Annual Percentage Rate (APR) is 22.9% and you will pay 5% of your chosen initial balance each month. Compute the monthly payment. $ Complete the table to show the values corresponding to the first two payments. (Round your answers to two decimal places if necessary.) Balance after Payment # Balance Finance Charge Payment Finance Charge and Payment Initial Balance Initial Balance $ How many months will it take for the card to be paid off? (Round up to the nearest month.) months Write any relevant formulas and describe your computations here. This answer has not been graded yet.Research current typical APRs or use those values from a credit card you hold. For a meaningful investigation, select an APR of at least 5% but no more than 50%. What APR do you select? % Using your chosen APR and assuming you will pay 5% of the initial balance each month, how many months will it take for your chosen initial balance on the card to be paid off? (Round up to the nearest month.) months Write any relevant formulas and describe your computations here. This answer has not been graded yet. Part 4 Start with the same chosen initial balance. Suppose that the APR is 22.9% and now you will pay 5% of the current balance each month. Complete the table to show the values corresponding to the first two payments. (Round your answers to two decimal places if necessary.) Balance after Payment # Balance Finance Charge Payment Finance Charge and Payment Initial Balance Initial Balance $ $ $ $ $ $ How many months will it take to bring the balance down to under $1? months Write any relevant formulas and describe your computations here. This answer has not been graded yet.Suppose that there is a rule for a particular credit card that requires a monthly payment of 5% of the current balance or $20-whichever is greater. Determine the specific effect, if any, that this rule has on your answers to Parts 2, 3, and 4. In part 2, you used an APR of 22.9% and payed 5% of the initial balance each month. Suppose you follow the new rule and pay either 5% of the current balance or $20, whichever is greater. Is your initial credit card balance paid off sooner or later? O The credit card balance will be paid off sooner. O The credit card balance will be paid off later. In part 3, you selected your own APR and payed 5% of the initial balance each month. Suppose you follow the new rule and pay either 5% of the current balance or $20, whichever is greater. Is your initial credit card balance paid off sooner or later? O The credit card balance will be paid off sooner. O The credit card balance will be paid off later. In part 4, you used an APR of 22.9% and payed 5% of the current balance each month until you had a balance of $1. Suppose you follow the new rule and pay either 5% of the current balance or $20, whichever is greater. Is your initial credit card balance paid off sooner or later? O The credit card balance will be paid off sooner. O The credit card balance will be paid off later. Part 6 Credit-card companies offer various promotional offers to encourage credit-card use. Find an example of at least one such promotional offer. Describe the promotional offer. This answer has not been graded yet. Determine the effect that it would have on the card-payoff duration you determined for Part 1. This answer has not been graded yet. Need Help? Read it