Perry loves shopping. When stores reopened last year, she went on a shopping spree. Over a period of 3 days, Perry spent $5,000 on clothes, shoes, and other fashion accessories. However, Perry did not have the cash to pay for the items she purchases. To finance her transaction, Perry analyzed two specialty credit cards at two different retailers. 

 

Retailer 1 offered Perry a credit card with a limit of $8,000 and annual interest charged at 18%. 

Retailer 2 offered Perry a credit card with a limit of $7,000 and interest charged at 16%.

 

1. If interest is compounded monthly, what is the effective annual rate for the credit card offered by retailer 1?
2. If interest is compounded daily, what is the effective annual rate for the credit card offered by retailer 2? 
3. Assume Perry signed up for credit card 1. If Perry makes monthly payments in the amount of $400 a month, how many months will it take her to pay off her credit card balance? 
4. Using the assumption in question 3, further assume Perry receives $1,000 from her parents for her birthday at the end of the year. If she deposits the $1,000's toward the balance at the end of the first year, how long will it take her now to pay off her credit card now?