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Task 1 – Credit within credit limit of credit card

The credit limit of your credit card is CZK 50,000.00. We pay for the goods in the amount of CZK 30,000.00. The card balance is CZK 20,000.00. If you pay off borrowed money within 45 days, no interest is charged. Calculate the cost (the charges plus interest) of borrowing of CZK 30,000.00 from the credit card under the following conditions.

  1. Within 45 days, you will pay the amount of CZK 20,000.00. The remaining amount of CZK 10,000.00 will be paid in instalments amounting to 5% of outstanding amount and interest rate is 21% p.a. In addition, you will pay CZK 350.00 for the card administration and CZK 20.00 a month for the credit administration.
  2. Within 45 days you will not pay any instalment, i.e. after expiration of this period you will pay off the whole borrowed amount, i.e. CZK 30,000.00. The minimum instalment amount will be also 5% of outstanding amount; interest rate is 21% p.a. In addition, you will pay CZK 350.00 for the card administration and CZK 20.00 a month for the credit administration.