Question 1

What is the APY on Monty's default or penalty rate if it is compounded monthly?

Accepted Answer

To calculate the APY on Monty's default or penalty rate compounded monthly, we need to use the following formula: APY = (1 + (i/n))^n - 1, where i is the nominal interest rate (in this case, 24%), n is the number of compounding periods per year (in this case, 12), and ^ denotes exponentiation. Plugging in these values, we get:

APY = (1 + (0.24/12))^12 - 1
APY = (1.02)^12 - 1
APY = 0.4258 or 42.58% (rounded to two decimal places)

Therefore, the best choice is C, which corresponds to the calculated APY of 42.58%.

Question 2

When you withdraw cash from an ATM using your credit card

Accepted Answer

When you withdraw cash from an ATM using your credit card, you begin paying interest immediately. This is because cash advances on credit cards typically start accruing interest from the day of the transaction, without a grace period.

Question 3

What advice would you give to Monty concerning his use of credit cards?

Accepted Answer

All of the above options are good advice for Monty. He needs to learn to live within his means, distinguish between wants and needs, and seek out the help of a credit counseling company to help him manage his credit card usage.

Question 4

List the three primary methods used to determine interest charges on an unpaid credit card balance.

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The answer of List the three primary methods used to...

Question 5

Teaser rates are very low.How long do they last? Is there any real benefit in them?

Accepted Answer

The answer of Teaser rates are very low.How long do...

Question 6

It is now three months later and Monty has missed two payments in a row and he is now paying the default or penalty rate on his balance.How much interest per month will Monty be accruing on his unpaid balance?

Accepted Answer

The penalty rate is typically expressed as an annual percentage rate (APR). If the penalty rate is 36% APR, then the monthly interest rate would be 36% divided by 12 months, which equals 3% per month.

Question 7

Describe the three primary methods used to determine interest charges on an unpaid credit card balance.

Accepted Answer

The answer of Describe the three primary methods used to...

Question 8

If you credit card APR is 20% compounded monthly and you carry a balance your effective rate will be

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The answer of If you credit card APR is 20%...

Question 9

If Bradley buys a new game console for $560 this month and sends in a credit card payment of $950 when he gets his statement,how much interest will he pay on the game console for the month?

Accepted Answer

The answer of If Bradley buys a new game console...

Question 10

What will be Monty's minimum payment due?

Accepted Answer

The answer of What will be Monty's minimum payment due?
...

Question 11

In 2017 the average APR on standard variable-rate credit cards was

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The answer of In 2017 the average APR on standard...

Question 12

Using the Adjusted Balance Method: If Monty sends in a payment for $1,000,how much will the finance charge be on his remaining balance? (Use the $6,000 balance for your calculations. )

Accepted Answer

The finance charge is calculated by multiplying the remaining balance by the monthly interest rate. The monthly interest rate is 1.5%, or 0.015. The remaining balance is $6,000 - $1,000 = $5,000. Therefore, the finance charge is $5,000 x 0.015 = $75.

Question 13

Most grace periods are

Accepted Answer

Most grace periods for credit card payments typically range from 21 to 25 days, allowing cardholders time to pay off their balance without incurring interest.

Question 14

If Monty buys a new television for $800 this month and sends in a credit card payment of $1,200 when he gets his statement,how much interest will he pay on the television for the month?

Accepted Answer

The answer of If Monty buys a new television for...

Question 15

What is the current APY on this credit card if it is compounded monthly?

Accepted Answer

The answer of What is the current APY on this...

Question 16

What is the APY on Bradley's default,or penalty,rate if it is compounded monthly?

Accepted Answer

To calculate the APY, we need to use the formula: APY = (1 + (r/n))^n - 1, where r is the annual interest rate, and n is the number of times the interest is compounded in a year.

From the question, we know that Bradley's default rate is 30%, and his penalty rate is 40%. Since the penalty rate is applied when he misses a payment, we can assume that this rate will be applied at least once during the year. Therefore, we can use the penalty rate to calculate the APY.

If the penalty rate is compounded monthly, then n = 12. Plugging in the values, we get:

APY = (1 + (0.40/12))^12 - 1
APY = 0.3848 or 38.48%

Therefore, the best choice is C.

Question 17

If you carry a balance on your card and have an 18.5% APR compounded monthly,your actual rate will be

Accepted Answer

When a credit card's APR is compounded monthly, the actual rate is higher than the stated APR. To calculate the actual rate, the formula is:

(1 + APR/12)^12 -1

Plugging in the numbers:

(1 + 0.185/12)^12 -1 = 0.2015 or 20.15%

Therefore, the correct answer is C) 20.15%.

Question 18

Compare and contrast the average,previous,and adjusted balance methods.

Accepted Answer

The answer of Compare and contrast the average,previous,and adjusted balance...

Question 19

Using your credit card for a cash advance in an emergency is probably a good idea.Using cash advances for non-emergencies is a terrible idea.Explain the characteristics that make cash advances very dangerous.

Accepted Answer

The answer of Using your credit card for a cash...

Question 20

________% of Americans age 25-34 carry a balance on their credit cards.

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The answer of ________% of Americans age 25-34 carry a...

Quiz 6: Using Credit Cards: the Role of Open Credit