Stony Brook Calculus Materials

Calculus I - Handouts

Choosing the best credit card: problems on linear functions and their graphs

Note: the numbers in these problems reflect the financial world in Fall, 1992. Today's numbers may be different.

The Marine Midland Bank charges its MasterCard holders a $15 per year membership fee, and 19.8% interest on their average balance.

The bank is currently offering two variable rate cards: a Variable Rate MasterCard ($25 membership fee, 12.9% interest) and a Variable Rate 24 Karat Gold MasterCard ($45 membership fee, 11.9% interest).

For this problem, assume that these rates will stay constant for the next year.

1. Suppose your average balance is $100. Which card is more advantageous?

2. Same question for $500 and $3000 balances.

3. For the three cards, display the annual cost vs. average balance graphs on your calculator. Locate the points at which it makes financial sense to change from one card to another.