You keep an average outstanding balance on your credit card of $1,000.Your present credit card has an annual premium of $25 and 18% APR on the outstanding balance.Given the following list of annual premiums,what is the maximum amount you would be willing to pay for a credit card that had a 15% APR?

Question

Quizplus · Accepted Answer

With an 18% APR on a $1,000 balance, you're paying $180 in interest annually. Adding the $25 annual premium, your total cost is $205 per year. At 15% APR, the interest on a $1,000 balance would be $150. To find the maximum premium you'd pay to keep your total cost the same ($205), subtract the lower interest amount ($150) from your current total cost ($205), which equals $55. The closest option without going over is $50 (D).

You Keep an Average Outstanding Balance on Your Credit Card