Reference no: EM133070431

Assume that your friend chooses the CommBank Awards credit card. After about six months of using her new card as planned, she suddenly loses her casual job. As a result, she can't repay the full balance that month and only makes the minimum repayment. She soon finds another job. She keeps spending at a rate of $1,000 per month given that these expenses are 'needs' and she can't really go without them. At the end of the next month (having accumulated another $1,000 of balance), she repays $1,000 and keeps doing the same for the next 6 months. Calculate the net monetary benefit for the 12-month period described, again assuming an alternative interest rate of 0.3% p.a. (0.3%/12). For simplicity, we will ignore the (55-day) interest-free period and deal with the interest charges in the following way:

-Since we do not know the timing of the individual purchases, we will use monthly simple interest calculations.

-If your friend does not pay her monthly credit card bill in full, then she will be charged interest on the remaining balance in the next month (since it is past the interest-free period). Use monthly simple interest calculations.

-If your friend continues to use the credit card in the next month (after not paying her credit card bill in full), then she will be charged some residual interest on her purchases that month

-To calculate the residual interest charges, we will assume that half of the total monthly spending incurs interest at the end of the month (since we do not know the timing of the purchases). Again, use monthly simple interest calculation.