He makes minimum payment on his credit card

Assignment Help Financial Management

Reference no: EM131948552

Ben is a 20-year old student. He does not have much savings, but he did manage to save $1,500 towards buying a car. The savings account pays an interest rate of 2.20% per annum. He also has a credit card balance of $2,000 with an interest rate of 20.95% per annum.

Ben manages to save $200 per month. He makes a minimum payment on his credit card (3% of the balance) and puts the rest into his savings account. What will be Ban’s net worth one year from now, assuming monthly compounding?

What if Ben pays $200 towards his credit card balance every month? Comment on your findings.

Reference no: EM131948552

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