show all calculation Suppose Alex could borrow using either a credit card that charges 1 percent...

show all calculation

Suppose Alex could borrow using either a credit card that charges 1 percent per month or a bank loan with a 12 percent quoted interest rate that is compounded daily. Which one should she choose?

Expert Solution

Alex should chose CASE 2(bank loan) because in this case she has to pay lesser as compared to the credit card .

Lets assume that Alex borrows $1000 for one year.

Case 1-(credit card) She borrows at 1% compunded monthly

Case 2-(bank loan) She borrows at 12% compounded daily.

We will calculate periodic payments to see what she pays as an interest on the loan over the period of 1 year.For this we will use the formula for present value(PV) of annuity.

jeff jeffy answered 1 year ago

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