Viktor is a bike tour operator and needs to replace two of his touring bikes. He orders two bikes from the sporting goods store for a total of $2,000 and pays using his credit card. When the bill arrives, he reads the following information:

Balance: $2000

Annual interest rate: 14.9%

Minimum payment due: $40

Late fee: $10 if payment not received by 3/1/2013

a. To keep his good credit, Viktor promptly sends in a minimum payment of $40. When the next bill arrives, it looks a lot like the previous bill.

Balance: $1,984.34

Annual interest rate: 14.9%

Minimum payment due: $40

Late fee: $10 if payment not received by 4/1/2013

Explain how the credit card company calculated the new balance. Notice that the given interest rate is annual, but the payment is monthly.

b. Viktor was upset about the new bill, so he decided to send in $150 for his April payment. The minimum payment on his bill is calculated as 2% of the balance (rounded to the nearest dollar) or $20, whichever is greater. Fill out the details for Viktor’s new bill.

c. Viktor’s bank offers a credit card with an introductory annual interest rate of 9.9%. He can transfer his current balance for a fee of $40. After one year, the rate will return to the bank’s normal rate, which is 13.9%. The bank charges a late fee of $15. Give two reasons why Viktor should transfer the balance, and two reasons why he should not