Question

Jack and Jill applied for the same credit card from the same bank. The bank checked both of their FICO scores. Jack had an excellent credit rating, and
Jill had a poor credit rating


Jack was approved for a card with an APR of 12%. What was his monthly periodic rate?


Jill was approved for a card with an APR of 21%. What was her monthly periodic rate?


If each of them had an average daily balance of $700 and had to pay a finance charge, how much MORE will Jill pay than Jack?

Answer 1

Answer:

a. Jack's monthly periodic rate = 1%

b. Jill's monthly periodic rate = 1.75%

c. Amount paid more by Jill than Jack = $5.25

Step-by-step explanation:

a. Jack was approved for a card with an APR of 12%. What was his monthly periodic rate?

Jack's monthly periodic rate = Jack's annual percentage rate (APR) / Number of months in a year = 12% / 12 = 1%

b. Jill was approved for a card with an APR of 21%. What was her monthly periodic rate?

Jill's monthly periodic rate = Jill's APR / Number of months in a year = 21% / 12 = 1.75%

c. If each of them had an average daily balance of $700 and had to pay a finance charge, how much MORE will Jill pay than Jack?

Jack's finance charge = Jack's monthly periodic rate * Average daily balance = 1% * $700 = $7

Jill's finance charge = Jill's monthly periodic rate * Average daily balance = 1.75% * $700 = $12.25

Amount paid more by Jill than Jack = Jill's finance charge - Jack's finance charge = $12.25 - $7 = $5.25