Question

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

a. Felix was given a card with an APR of 14%. What was his monthly percentage rate? Round to the nearest hundredth of a percent.

b. Oscar was given a card with an APR of 21%. What was his monthly percentage rate? Round to the nearest hundredth of a percent.

c. If each of them had an average daily balance of $800 for a specific month, and had to pay a finance charge, how much more would Oscar pay than Felix?

Answer 1

A) The monthly percentage rate of Felix is;

B) The monthly percentage rate of Oscar is;

C) The amount that Oscar will pay more than Felix is; $0.96

Annual Percentage Rate

A) Felix was given a card with APR of 14%.

Thus;

Monthly percentage rate = 14%/12 = 1.63%

B) Oscar was given a card with an APR of 21%. Thus;

Monthly percentage rate = 21%/12 = 1.75%

C) We are told that each of them had an average daily balance of $800 for a specific month.

Thus;

Amount paid by Felix = 800 * 1.63%

Amount paid by Felix  = $13.04

Amount paid by Oscar = 800 * 1.75%

Amount paid by Oscar = $14

Difference in Payments = $14 - $13.04 = $0.96

Thus, Oscar pays $0.96 more than Felix.

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