Question

Credit card A has an APR of 22.2% and an annual fee of $50, while credit card

B has an APR of 23.9% and no annual fee. All else being equal, at about what
balance will the cards offer the same deal over the course of a year?
O A. $2385.75
B. $238.58
O C. $23,857.48
O D. $23.86

Answer 1

A. $2,385.75

Answer 2

$2,385.75

Explanation:

The computation of the balance left that offer the same deal is shown below:

Let us assume the required balance be P

Now the equation for the credit card A is

`P (1 + (0.222)/(12)^(12)) + \$50`

And, the equation for the credit card B is

`P (1 + (0.239)/(12))^(12)`

Now equate these two equations which are as follows

`P (1 + (0.222)/(12))^(12) + \$50 = P (1 + (0.239)/(12))^(12)`

1.246041193 P + $50 = 1.266998979 P

After solving this, the P value is $2,385.75