Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 1

Anita Wu, an engineering junior, received two guaranteed line-of-credit applications from two different banks. Each bank offered a different annual fee and finance charge.
Anita expects her average monthly balance after payment to the bank to be $300 and plans to keep the credit card she chooses for only 24 months. (After graduation, she will apply for a new card.) Anita's interest rate on her savings account is 6% compounded daily. Table 1 lists the terms of each bank:
(a) Compute the effective annual interest rate for each card.
(b) Which bank's credit card should Anita choose?
(c) Suppose Anita decided to go with Bank B and used the card for one year. The balance after one year is $1,500. If she makes just a minimum payment each month (say, 5% of the unpaid balance), how long will it take to pay off the card debt? Assume that she will not make any new purchases on the card until she pays off the debt.
Table 1