First National Bank of Jermyn has a portfolio of 10,000 credit card accounts. The bank charges $25 annual fee on these cards. There is a 25 day grace period on the accounts, and after that the cardholders pay interest at the rate of 1.25% per month on the unpaid balance. Half of the cardholders pay their balance in full every month, and their monthly bill is $800. The remaining cardholders carry an average balance of $1200 continuously. The operating expenses for the credit card portfolio, including defaults, are $100,000 annually. The cost of capital to the bank is 8%. Mellon Bank has offered to buy Jermyn\'s credit card portfolio for $5 million, plus the outstanding balance. Should Jermyn accept the offer?

Answer rating: 100% (QA)

Answer Yes Jermyn should accept the offer Jermyns cred... View the full answer