Answered: Credit card companies can change the… | bartleby

Entrepreneurial Finance

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter13: Other Financing Alternatives

Section: Chapter Questions

Problem 1fM

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Credit card companies can change the rules of the account if they give the borrower 45 days notice of the change.
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Match the following credit terms with the correct description. APR [Choose ] [Choose ] Known as the Annual Percentage Rate. Some credit cards charge these. They can be charged for membership and you may be required to pay them once a year. Credit cards that offer these give you cash or points for purchases you make. Occurs when you don't pay your monthly payment on time. These occur when you transfer your balance to a different card. When you move an existing balance to another credit card or account. The least amount of money you are obligated to pay back on a monthly basis to avoid fees and penalties. [Choose ] [Choose ] [Choose ] [Choose ] Fees Rewards Finance Charges Late fees Balance Transfer Minimum payment
What is a credit card’s grace period? A) it is the amount of time after a purchase and before it starts accruing interest B) it is a period during which the card’s interest rate cannot change C) it is the amount of time between the bill being issued and your payment being due D) it is the period during which you can return the card and not incur any fees
Note the following information. A line of credit is an agreement between a bank and a borrower by which the borrower can borrow any amount of money (up to a mutually agreed-upon maximum) at any time, simply by writing a check. Typically, monthly simple interest payments are required, and the borrower is free to make principal payments as frequently or infrequently as he or she wants. Usually, a line of credit is secured by the title to the borrower's house, and the interest paid to the bank by the borrower is deductible from the borrower's income taxes.James and Danna Wright did not have sufficient cash to pay their income taxes. However, they had previously set up a line of credit with their bank. On April 15, they wrote a check to the Internal Revenue Service on their line of credit for $10,154. The line's interest rate is 4.125%. (Round your answers to the nearest cent.) (a) Find the size of the required monthly interest payment.$ (b) The Wrights decided that it would be in their…
A pre-approved amount of open-end credit, based on a borrower's ability to pay, is called a(n) _____. revolving creditfinance charge average daily balanceline of credit
Why should credit professionals review the existing accounts at least once a year?
Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…
If a company accepts credit cards, they must record the expense on their books. Please prepare the journal entries for the following scenario: Company A sells $480,000 on credit card sales. The credit card charges a 4.5% fee for the use of the card. The card company also deposits the cash into the company’s bank account the same night as the credit cards are accepted.
The facility where banks advance loans to its customer’s up to a certain amount if there is no deposits in the current account.
Even before you use a new credit card, what information is the institution that issued your card required by law to disclose? o The rate of interest and method used to compute finance charges o The rate of interest and estimated dollar amount of finance charges o The method used to compute finance charges and estimated dollar amount of finance charges The interest rate on cash advances is generally The most common method that banks and retail credit card issuers use to compute finance charges is the average daily balance (ADB) method. You expect to actively use your card. Which variation of the ADB method will be least expensive for you? O ADB excluding new purchases O ADB including new purchases It doesn't matter Consider the following case: On June 1, Crystal's credit card has a balance of $5,626.25. According to the terms of the card's lending agreement, an interest rate of 20% per year is assessed and the monthly finance charges are calculated using the Average Daily Balance (ADB)…
A borrower has two alternatives for a loan: (1) issue a $360,000, 75-day, 6% note or (2) issue a $360,000, 75-day note that the creditor discounts at 6%. Assume a 360-day year. This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Calculate the amount of the interest expense for each option. Round your answer to the nearest dollar. $ ________________________ Determine the proceeds received by the borrower in each alternative. Round your answers to the nearest dollar. (1) $360,000, 75-day, 6% interest-bearing note: $___________________________ (2) $360,000, 75-day note discounted at 6%: $ _________________________
Suppose that you owe $2,000 on a credit card that charges 18% APR and you pay either the minimum 10% or $20, whichever is higher, every month. How long will it take you to eliminate the debt? Assume that the bank uses the previous-balance method to calculate your interest, meaning that the bank does not subtract the amount of your payment from the beginning balance but charges you interest on the previous balance.
A payday loan is a short-term loan that is repaid on the next payday, often by giving the lender electronic access to a personal checking account. Some states have statutes that regulate the fees that may be charged for payday loans. Suppose that, in a certain state, finance charges on a payday loan may not exceed 18.8% of the amount advanced. Find the annual interest rate if $300 is borrowed for 8 days at the maximum allowable charge. The annual interest rate is %

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