Part 2

Your three best friends have just arranged a dream Winter Break trip to Panama City Beach in Florida. They have an upscale condo reserved that is right on the beach with four swimming pools and all of the best amenities. Your condo balcony has a pristine view of the beach and the Gulf of Mexico. One of your friends has arranged this condo through a deal on their parent's condo timeshare. The condo will cost $2800 for the week, which you would split equally with your friends ($700 each). You would also drive down in your friend's car and split the cost of gas equally between all four friends (you would need to know the distance from Cincinnati to Panama City Beach which you can look up via an online map program). Assume the cost of gas is $2.29 per gallon and your friend's car averages about 23 MPG. You also need to budget for food, drinks, entertainment, shopping, etc.

- What would be your estimated total costs for this trip when factoring in all expenses?

- How would you make this decision? What things (tradeoffs) would factor into your decision to make this trip or to pass on this opportunity? What would be the opportunity costs of this decision?

- After analyzing this scenario, if that trip was offered to you today so that you could enjoy it this December for Winter Break, would you agree to go on the trip? How would you pay for the trip? Explain your decision.

Finally, let's assume that you are going to make the trip and since you are a college student, your budget is tight. You will need to charge the entire amount of your trip on your new credit card. Your new credit card has a spending limit of $2200 and the APR interest rate on your card is 22.99% for purchases.

- How much will you charge on your credit card (use the amount you calculated the trip to cost above)?

- Assuming do not charge anything else other than the trip amount to your credit card and you pay only the required monthly minimum payment (3% of the balance) each month until the balance is paid off, how many months will it take to pay off this Winter Break trip charged to your credit card? How much will you pay in interest on your original charges? What will be the total cost of your Winter Break trip after the initial amount is paid and you add in the interest payments?

- Now assume that you want to pay off the trip amount faster and pay less in interest. You decide to double the amount you pay each month to 6% of the balance instead of only the required 3% of the balance. How many months will it take to pay off this Winter Break trip charged to your credit card? How much will you pay in interest on your original charges? What will be the total cost of your Winter Break trip after the initial amount is paid and you add in the interest payments?

- Now assume that you want to pay off the trip amount even faster and pay even less in interest. You decide to pay 10% of the balance each month instead of only the required 3% of the balance. How many months will it take to pay off this Winter Break trip charged to your credit card? How much will you pay in interest on your original charges? What will be the total cost of your Winter Break trip after the initial amount is paid and you add in the interest payments?

- How might this scenario change your thought process when making purchases on credit and paying of credit card bills in the future?

- How does this purchase and the associated decision making relate to the material from Chapter 1 and Chapter 2 in your textbook? Explain.