Question

Dylan has an offer from a credit card issuer for 0% apr for the first 30 days and 14.04% apr afterwards compounded daily. What effective interest rate is Dylan being offered?

Answer 1

The answer would be 13.75 Thats the effective interest rate. (btw this question is about me lol)

Answer 2

13.75%

Explanation:

Givens:

• APR first days: 0%.
• APR afterwards: 14.04%.

We have to find the effective interest rate, which is defined as:

`R=(1+(r)/(365) )^(D)-1\\`

First days:

`R=(1+(0)/(365) )^(60)-1=1^(60)-1=0`

Afterwards:

`R=(1+(0.1404)/(365) )^(335)-1=0.1375 \ (or \ 13.75\%)`

So, the effective interest would be the difference between these two, which is 13.75%.