Question

Caleb is sick and tired of having to walk everywhere he goes. He has been saving

money for a car but a reliable car that won’t bankrupt him with repair costs is around
$5,000. For $2,500, he can buy one of those cool Segways like the mall cops scoot
around on.
He had a goofy looking Economics teacher in high school who talked about credit cards.
Shortly after the class ended, Caleb went out and got himself a Visa credit card that has
an annual fee of $150 per year.
Caleb goes to the Segway store and pays for a brand new Segway using his Visa card.
He leaves the store with his awesome new toy, forgetting that a bill will arrive in his
mailbox in about 30 days.
Questions:
1. Should Caleb use his credit card to make this purchase? Explain how he
could use his credit card responsibly.
2. How much money does the Segway store receive? From whom does the
store receive it?
3. How much money does Visa make on Caleb’s initial purchase?
4. Suppose Caleb gets the bill and decides to make the minimum payment
instead of paying off the balance. Is this wise?
5. Use any website to answer or calculate the following for Caleb:
a. the likely interest rate based on what you know so far;
b. the minimum monthly payments he would make at both 2% and 4%;
c. the total number of years it would take him to pay off the balance at
both 2% and 4%;
d. the total amount of interest he would pay if he made minimum monthly
payments at both 2% and 4% until the balance was paid off.

Answer 1

1. Should Caleb use his credit card to make this purchase? Explain how he

could use his credit card responsibly.

He should use his credit card. Because if he will spend all his money on what he WANTS then he will lose his money easily and not be able to pay his fees or whatever. so he should pay for the needed things then pay for the not-so-important things.

2. How much money does the Segway store receive? From whom does the store receive it?

A brand new second-generation Segway PT will cost anywhere from around $6,000 up to $8,000, depending on what model you decide to go for.

3. How much money does Visa make on Caleb’s initial purchase?

150 a year

4. Suppose Caleb gets the bill and decides to make the minimum payment instead of paying off the balance. Is this wise?

No this is not wise because paying only the minimum amount due on your credit card bill could impact your credit scores and cause you to pay a lot in interest. and if you pay more you get to save more money. so he should not do it.

I am sorry can you pls explain to me what I have to do in question 5 I do not get it.

Also hope it helped!!!!!