Question

During the first year (while the introductory APR is still in effect), what is the approximate 7 points difference in interest paid on a balance of $2,000 by a customer with poor creditworthiness as compared to a customer with excellent creditworthiness?

a) $200
b) $320
c) $80
d) $120

Answer 1

There is no approximate 7 point difference in interest paid on a balance of $2,000 between a customer with poor creditworthiness and a customer with excellent creditworthiness.

Step-by-step explanation:

In order to determine the approximate 7 point difference in interest paid on a balance of $2,000 by a customer with poor creditworthiness compared to a customer with excellent creditworthiness, we need to calculate the interest paid by each customer separately. Let's assume the annual interest rate is 15% for both customers during the first year.

For a customer with poor creditworthiness:

Interest paid = (Balance) x (Interest Rate) = $2,000 x 0.15 = $300

For a customer with excellent creditworthiness:

Interest paid = (Balance) x (Interest Rate) = $2,000 x 0.15 = $300

Therefore, the difference in interest paid is $300 - $300 = $0. There is no approximate 7 point difference in interest paid on a balance of $2,000 between a customer with poor creditworthiness and a customer with excellent creditworthiness. Therefore, none of the given options (a), b), c), d)) are correct.