PFIN 2nd Edition by Lawrence Gitman ,Michael Joehnk,Randall Billingsley

Exercise 5

Peter Andrews recently graduated from college and is evaluating two credit cards. Card A has an annual fee of $75 and an interest rate of 9%. Card B has no annual fee and an interest rate of 16%. Assuming that Peter intends to carry no balance and pay off his charges in full each month, which card represents the better deal? If Peter expected to carry a significant balance from one month to the next, which card would be better? Explain.