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

Exercise 6

Jean has several credit cards, on which she is carrying a total current balance of $12,500. She is considering transferring this balance to a new card issued by a local bank. The bank advertises that, for a 2% fee, she can transfer her balance to a card that charges a 0% interest rate on transferred balances for the first 9 months. Calculate the fee that Jean would pay to transfer the balance, and describe the benefits and drawbacks of balance transfer cards.