You are considering two ways of financing a spring break vacation. You could put it on your credit card, at 15% APR, compounded monthly, or borrow the money from your parents, who want an interest payment of 7% every six months. Which is the lower rate? (Note: Be careful not to round any intermediate steps less than six decimal places.) The effective annual rate for your credit card is%. (Round to two decimal places.)
You are considering two ways of financing a spring break vacation. You could put it on your credit card, at 15% APR, compounded monthly, or borrow the money from your parents, who want an interest payment of 7% every six months. Which is the lower rate? (Note: Be careful not to round any intermediate steps less than six decimal places.) The effective annual rate for your credit card is%. (Round to two decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You are considering two ways of financing a spring break vacation. You could put it on your credit card, at 15% APR,
compounded monthly, or borrow the money from your parents, who want an interest payment of 7% every six months.
Which is the lower rate? (Note: Be careful not to round any intermediate steps less than six decimal places.)
The effective annual rate for your credit card is
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Effective annual interest rate(EAR) refers to the real rate of return that we earn on our savings or paid onto a loan when the effect of the compounding period is taken into consideration. The more the compounding periods, the more will be the effective interest rate, and the lower the number of the compounding periods, the lower will be the effective interest rate . When there is only one compounding period in a year, the effective annual interest rate will b equal to the stated nominal interest rate.
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