Reference no: EM133034593

Problem: Maxim, a newly graduated student, just moved to a new city to start his first job. In order to assist him with moving expenses, he applied for a credit card. According to its terms, for any payment he makes within a month from the date of purchase, he will be charged no interest; however, if he does not pay off the full balance, interest will be charged daily on the remaining balance effective from the date of purchase. Every month he must make a minimum payment. On May 05, Maxim spent $1850 of his $2000 credit card limit buying furniture for his new apartment. He didn't make any other purchases in the month of May.

1. On June 10, Maxim made the minimum payment of $39 that was charged on his credit card. After his payment, interest took effect, and his new balance was $1865.77. What is the nominal interest rate of his credit card compounded daily? Round your answer to two decimal places, and use this rounded value for the remainder of the case.

2. What semi-annually compounding rate is equivalent to his daily-compounding credit card rate?

3. Maxim made no further purchases in the months of June and July, and made the minimum payments of $39 on July 01 and August 01. What will be his credit card balance on August 01, after his minimum payment? (Hint: a timeline diagram showing the payment dates.)

4. Maxim was beginning to grow concerned about his growing debt, and wanted to fully pay off his credit card. What three equal payments, on September 05, October 05, and November 05, must he make in order to settle his debt?

5. After settling his debt on November 05, how much did Maxim pay in interest towards his credit card since May 05?