smc-814-10-Credit Cards

Financial Maths, STD2 F4 2025 HSC 27

A credit card has an interest-free period of 45 days from and including the date of purchase. Interest is charged on purchases made, compounding daily at a rate of 13.74% per annum, from and including the day following the interest-free period.

Concert tickets were purchased for a total of $392 using this credit card.

Full payment was made on the 68th day from the date of purchase. There were no other purchases on this credit card.

What was the total interest charged when the account was paid in full? (3 marks)

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$\text{Interest charged}\ =\$ 3.41$

Show Worked Solution

$\text{Day 1-45: no interest is charged}$

$\text{Day 46-68: interest charged (23 days)}$

$\text{Daily interest rate}=\dfrac{13.74}{365} \%=\dfrac{13.74}{365 \times 100}$

$\text{Amount owing}=392\left(1+\dfrac{13.74}{365 \times 100}\right)^{23}=\$ 395.41$

$\text{Interest charged}=395.41-392=\$ 3.41$

Financial Maths, STD2 F4 2023 HSC 32

Ali has a credit card which has no interest-free period. Interest is charged at 13.5% per annum, compounding daily, on the amount owing.

During the month, Ali made only one purchase of $450 using the credit card. The full amount owing was repaid 21 days later.

Calculate the amount of interest charged on the purchase, assuming that interest is charged for the 21 days. (2 marks)
What percentage of the full amount repaid is the interest? Give the answer to two decimal places. (2 marks)

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`$3.51`
`0.77%`

Show Worked Solution

a. `text{Daily interest rate}\ (r) = 13.5/365 % = 0.135/365`

`n=\ text{21 days}`

`FV`	`=PV(1+r)^n`
	`=450(1+0.135/365)^21`
	`=$453.51`

`:.\ text{Interest charged}\ = 453.51-450=$3.51`

♦ Mean mark (a) 45%.

b.	`text{Interest as % total repaid}`	`=3.51/453.51 xx 100`
		`=0.007739…`
		`=0.77%\ text{(to 2 d.p.)}`

♦ Mean mark (b) 49%.

Financial Maths, STD1 F3 2021 HSC 30

Blake opens a new credit card account on 1 May. He uses it, for the first time, on 4 May to buy concert tickets for $850.

He makes no further purchases or repayments during the month of May.

A statement for the credit card is issued on the last day of each month.

The statement for May shows that interest is charged at 19.75% per annum, compounding daily, from 20 May (included) until 31 May (included).

What is the compound interest shown on the statement issued on 31 May? (3 marks)

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The minimum payment is calculated as 3% of the closing balance on 31 May. Calculate the minimum payment. (1 mark)

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`$5.54`
`$25.67`

Show Worked Solution

a. `text(Daily interest rate) = 19.75/365 = 0.05411text(%) = 0.0005411`

`text(Days incurring interest = 12)`

`text{Card balance (31 May)}`	`= PV(1+r)^n`
	`= 850 (1 + 0.0005411)^12`
	`= $855.54`

`:.\ text(Interest)`	`= 855.54-850`
	`= $5.54`

b.	`text(Minimum payment)`	`= 855.54 xx 0.03`
		`= $25.67`

Financial Maths, STD2 F4 2020 HSC 22

Nisa has a credit card on which interest at 17% per annum, compounded daily, is charged on the amount owing.

At the beginning of the month, Nisa owes $500 on her credit card. She makes no other purchases using the credit card, but fifteen days later, she repays $250.

Assuming that interest is charged for the fifteen days, calculate the amount owing on the credit card immediately after the $250 payment is made. (3 marks)

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`$253.50`

Show Worked Solution

`text{Days of interest}\ (n) = 15`

`text{Daily interest rate}\ (r) = frac{0.17}{365} = 0.00046575 …`

`text{Amount owing}\ (FV)`	`= PV (1 + r)^n – 250`
	`= 500 (1.00046575 …)^15 – 250`
	`= 503.50 – 250`
	`= $253.50`

Financial Maths, STD2 F4 2019 HSC 27

Ashley has a credit card with the following conditions:

There is no interest-free period.
Interest is charged at the end of each month at 18.25% per annum, compounding daily, from the purchase date (included) to the last day of the month (included).

Ashley's credit card statement for April is shown, with some figures missing.

The minimum payment is calculated as 2% of the closing balance on 30 April.

Calculate the minimum payment. (3 marks)

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`$74.40`

Show Worked Solution

`text(Daily interest)`	`= 18.25/(100 xx 365)`
	`= 0.0005`

♦ Mean mark 39%.

`text(Closing balance)`	`= 3700(1.0005)^11`
	`= 3720.40`

`:.\ text(Minimum payment)`	`= 3720.40 xx 0.02`
	`= $74.408…`
	`= $74.41\ \ text{(nearest cent)}`

Financial Maths, STD2 F4 2018* HSC 28d

Yanika opens a new credit card account, with interest and fees as shown.

Interest

- Compound interest calculated daily at the rate 12.41% p.a.
- No interest-free period

Fees

- $0 for online repayments
- $3 for repayments in cash (fee added to balance immediately after repayment)

Yanika makes a single purchase of $849 with the credit card.

Show that the balance owing on the credit card 24 days after making the purchase is $855.95 . (2 marks)

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Yanika makes her first repayment 24 days after making the purchase. She makes a cash repayment of $450.

What is the balance owing on the credit card immediately after her repayment is made and the repayment fee has been charged? (1 mark)

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`text(See Worked Solutions)`
`$408.95`

Show Worked Solution

i. `text(Days of interest)\ (n) = 24`

♦ Mean mark part (i) 48%, part (ii) 49%.

`text(Daily interest rate)\ (r) = 0.1241/365 = 0.00034`

`text(Balance Owing)\ (FV)`	`= PV(1+r)^n`
	`= 849(1.00034)^24`
	`= 855.954…`
	`=$855.95\ \ text{(nearest cent)}`

ii.	`text(Balance owing)`	`= 855.95 – 450 + 3`
		`= $408.95`

Financial Maths, STD2 F4 2016 HSC 17 MC

Ariana is charged compound interest at the rate of 0.036% per day on outstanding credit card balances. She has $780 outstanding for 24 days.

How much compound interest is she charged?

$6.74
$6.77
$786.74
$786.77

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`=> B`

Show Worked Solution

`text(Total owing)`

♦ Mean mark 38%.
COMMENT: Credit card problems consistently produce sub-50% mean marks. Important review area.

`= P(1+r)^n`

`= 780(1 + 0.036/100)^24`

`= 786.77`

`:.\ text(Interest charged)`

`= 786.77 – 780`

`= $6.77`

`=> B`

Financial Maths, STD2 F4 2015* HSC 29a

On 20 August, tickets were purchased for $425 using a credit card. No other purchases were made using this card in August. Compound interest was charged daily at a rate of 18.25% per annum. There was no interest‑free period. The period for which interest was charged included the date of purchase and the date of payment.

What amount was paid when the account was paid in full on 31 August? (2 marks)

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`$427.56`

Show Worked Solution

`text(Days of interest)\ = 12`

♦ Mean mark 35%.

`text(Daily interest rate)\ = 0.1825/365=0.0005`

`text(Total Paid)\ (FV)`	`= PV(1+r)^n`
	`= 425(1.0005)^12`
	`= 427.557…`
	`=$427.56\ \ text{(nearest cent)}`

Financial Maths, STD2 F4 2006* HSC 25b

In June, Ms Bigspender received a statement for her credit card account.

The account has no interest-free period. Compound interest is calculated daily and charged to her account on the statement date.

For how many days is she charged interest on her purchase? (1 mark)

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Calculate the interest charged to her account. (2 marks)

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`29`
`$8.98`

Show Worked Solution

i. `text(# Days interest charged)`

`=\ text{9 (in May) + 20 (in June)}`

`= 29`

ii. `text(Daily interest rate)\ (r) = 0.0498/100=0.000498`

`text(Closing Balance)\ (FV)`	`= PV(1+r)^n`
	`= 617.72(1.000498)^29`
	`= $626.703`

`:.\ text(Interest charged)`	`=626.70 – 617.72`
	`=$8.98`

Financial Maths, STD2 F4 2004 HSC 19 MC

Kerry has a credit card. She is charged 0.05% compound interest per day on outstanding
balances.

How much interest is Kerry charged on an amount of $250, which is outstanding on her
credit card for 30 days?

$3.75
$3.78
$253.75
$253.78

Show Answers Only

`B`

Show Worked Solution

`text(Using)\ A = P(1 + r)^n`

`A`	`= 250 (1 + 0.0005)^30`
	`= 250 (1.0151…)`
	`= 253.777…`

`:.\ text(Amount of interest charged)`

`= 253.777… – 250`

`= $3.777…`

`=> B`

Financial Maths, STD2 F4 2010* HSC 22 MC

In July, Ms Alott received a statement for her credit card account. The account has no interest free period. Compound interest is calculated daily and charged to her account on the statement date.

What is the minimum payment due on this account?

`$23.56`
`$25.00`
`$86.08`
`$87.20`

Show Answers Only

`D`

Show Worked Solution

`text(Days of interest)\ (n) =2+23=25`

♦♦♦ Mean mark 20%. Lowest scoring MC question in the 2010 exam.

`text(Daily interest rate)\ (r) = 0.0521/100 = 0.000521`

`text(Closing Balance)\ (FV)`	`=PV(1+r)^n`
	`=1721.50 (1.000521)^25`
	`=$1744.06`

`text(5% of closing balance)`	`=5/100xx1744.06`
	`=87.20\ text((nearest cent))`

`text(S)text(ince)\ $87.20>$25\ , text(minimum payment)=$87.20`

`=>D`

Financial Maths, STD2 F4 2011* HSC 10 MC

A television was purchased for $2100 on 12 April 2011 using a credit card. Compound interest was charged daily at a rate basis 19.71% per annum for purchases on this credit card. There were no other purchases on this credit card account.

There was no interest-free period. The period for which interest was charged included the date of purchase and the date of payment.

What amount was paid when the account was paid in full on 20 May 2011?

$2143.09
$2143.53
$2144.23
$2144.68

Show Answers Only

`D`

Show Worked Solution

♦♦ Mean mark 32%
COMMENT: Make sure you know how to adjust an annual rate to a daily rate, as shown in the Worked Solutions.

`text(Days for interest)\ (n) =19+20=39`

`text(Daily interest rate)\ (r) = 0.1971/365 = 0.00054`

`text{Total paid}\ (FV)`	`= PV (1+r)^n`
	`=2100(1.00054)^39`
	`=$2144.68`

`=>D`

Financial Maths, STD2 F4 2012* HSC 26c

Heather used her credit card to purchase a plane ticket valued at $1990 on 28 January 2011. She made no other purchases on her credit card account in January. She paid the January account in full on 19 February 2011.

The credit card account has no interest free period. Compound interest is charged daily at the rate of 21.9% per annum, including the date of purchase and the date the account is paid.

How much interest did she pay, to the nearest cent? (2 marks)

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Show Answers Only

`$27.64`

Show Worked Solution

`text(Days of interest)\ (n) = 4+19=23`

`text(Daily interest rate)\ (r) = 0.219/365=0.0006`

♦ Mean mark 38%
MARKER’S COMMENT: Too many students calculated the # days as 22 instead of 23!

`text(Total Paid)\ (FV)`	`= PV(1+r)^n`
	`= 1990(1.0006)^23`
	`=2017.644…`
	`=$2017.64`

`:.\ text(Interest Paid)`	`=2017.64-1990`
	`=$27.64`