Collecting Credit Card Debt A bank offers a credit card that can be used in various...
- Collecting Credit Card Debt A bank offers a credit card that can be used in various locations. The bank’s analysts believe that the percentage P of accounts receivable collected by t months after credit is issued increases at a decreasing rate. Historical data suggest the following function:
The average credit issued in any one month is $125 million, and historical experience suggests that for new credit issued in any month, collection efforts cost $1 million per month.
- Determine the number of months that collection efforts should be continued if the objective is to maximize the net collections (dollars collected minus collection costs). Allow for fractional months.
- Under the optimal policy in (a), what percentage of accounts receivable should be collected?
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Collecting Credit Card Debt A bank offers a
credit card that can be used in various...
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