Question
QUESTION You receive a credit card solicitation in the mail offering an APR of 24.99%. The fine print reveals that card balances have interest compounded
QUESTION
You receive a credit card solicitation in the mail offering an APR of 24.99%. The fine print reveals that card balances have interest compounded monthly. What then, is the EAR (or APY) of the credit card and why is it different from the APR? Select your answer below.
A) The APY is 28.1%. It is higher because it takes into account the deceptive advertising practices of credit card companies.
B) The APY is 26.4%. It is higher because it takes into account the deceptive advertising practices of credit card companies.
C) The APY is 28.1%. It is higher because it takes into account compounding of interest and the time value of money.
D) The APY is 26.4%. It is higher because it takes into account compounding of interest and the time value of money.
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ANSWER C The APY is 281 It is higher because it takes into account compounding of interest ...
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Fundamentals of corporate finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
9th edition
978-0077459451, 77459458, 978-1259027628, 1259027627, 978-0073382395
