Dr. J's Maths.com
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Financial Maths - Credit cards.
Test Yourself 1.


 

  1. How many days are there for interest payments in the following periods (so all days included in the count):

(i) 3 January to 10 January?

(ii) 18 February to 28 February?

(iii) 16 March to 13 April?

(iv) 21 May to 24 June?

Answer.(i) 8 days.
(ii) 11 days.
(iii) 29 days.
(iv) 35 days.
  2. A Credit card has an interest rate of 22.5% p.a.

(i) What is the corresponding monthly interest rate?

(ii) What is the corresponding daily interest rate?

Answer.(i) Monthly rate = 1.875%.
(ii) Daily rate = 0.0616%
= 0.000616
  3. Will is charged interest at a rate of 21·5% per annum, compounding daily on any outstanding credit card balances.

He has a $1,654 balance outstanding for 13 days.

How much interest is Will charged?

Answer.Interest is $12.71
  4.
  5.
Calculating interest. 6. Ish has a store credit card for one of the main fashion outlets. There is no annual fee and the annual compound interest rate on purchases is 15% p.a. That interest is charged from (and including) the day of purchase to the day of payment.

(i) Show that the daily interest rate can be expressed as 0.0411%.

(ii) On 24 April, Ish purchased some new fitness equipment for $256 and charged the purchases to her store credit card. She paid the full amount owing including interest accrued on 7 May. What was the total amount Ish paid for the equipment?

Answer.(ii) Payment is $257.48
  7. Sunil has a credit card which has no interest free period. The interest is charged daily at a rate of 18% p.a.

Sunil charged $ 987.56 on his card 21 days ago.

What is his present interest charge?

Answer.Interest is $10.31
  8.
  9. Gloria is charged 22.5% p.a. interest, compounded daily, on her credit card, with no interest-free period. Interest is charged from, and including, the date of purchase to, and including, the date of payment.

She checks her balance on the 15th of April and finds an outstanding balance of $3,141.59. On the 20th of May she makes a $271.83 purchase, and on the 31st of May she makes a purchase of $42.42.

How much is owing on Gloria’s credit card when she makes her next payment on the 6th of June?

Answer.$3245.59 + $273.85 + $42.60
= $3562.84
  10.
Reading a statement.

11. Som has a credit card from a financial institution. There is no interest free period.

Interest is charged at the end of the month at the rate of 22.5% p.a. compounding daily including both the date of purchase and the last day of the month.

Som's statement for May is as follows (with some entries missing):

Statement period: 1 May to 31 May.
Date Details Amount
1 May Opening balance $0.00
21 May Computer $1,250.00
31 May Interest ???
31 May Closing balance ????

The minimum payment is calculated as 5% of the closing balance on 31 May.

Calculate Som's minimum payment.

Answer.Closing balance: $62.93
  12.