What is the stated apr of the parent offer

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A recent graduate of the university has gotten into a little more credit card debt than they had anticipated. They currently owe $22,000; the credit card company charges 1.5% per month on this debt. The graduate's parents offer to extend a loan to pay off the debt, with the interest rate charged equal to .6667% per month.

a) What is the stated APR of the credit card company debt? What is the stated APR of the parent offer?

b) What is the stated EAR of the credit card company debt? What is the stated EAR of the parent offer?

c) The graduate has realized the equal payments are too large given the salary of his new job. They need a new plan. First, which lender should they use, the credit card company or the parents? If they set it up so the payments start small, then increase, say at 0.5% per month (the first payment will still come in one month's time) what must the first payment be for the loan to still be paid off in 5 years of monthly payments?

Reference no: EM133116441

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