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Group Activity 13 |
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Group Activity 13 |
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Read the following article that appeared on MSN.com - 4 Journeys Back From Hell
1. The first story is about Danielle Rhoades. The article states that she is paying $650 in interest payments on her card per month. Do you think she is? Explain.
2. Vige Barrie had $60,000 in credit card debt. Based on the article, use a balance of $60,000, a monthly payment of $1,500 (flat payment) and assume an average interest rate of 20%.
a. What is Vige's balance after 5 years? How much in interest in total did she pay after the 5 years? Paste the first 5 lines of you amortization table in your Word document.
b. Now assume that Vige pays $1,825.82 per month (flat payment), after how many months will her balance be about 12-13 cents? How much interest did she pay after 48 months? (Don't forget to delete the rows where the end balance is negative before you sum the interest column.) Paste the first 5 lines of you amortization table in your Word document.
c. Does it make sense for Vige to try and pay $1,825,82 instead of $1,500 per month? Explain.
3. Let's assume that Paul Canady decided to stop using his credit after he accumulated a balance of $2,000 on his credit card (not $15,000) and it carried an interest rate of 15%. His credit card company has also given a choice of minimum payments.
a. Minimum payment option 1 - If he pays a minimum payment of 2% per month (not less than $25), what is his balance after 5 years? What is the amount of interest he paid to date? About how long will it take him to pay off his credit card if he continues to pay the minimum payment? Paste the first 5 lines of you amortization table in your Word document.