Question

Madeline’s credit card had an APR of 18.96% All last year, and interest was compounded periodically throughout the year. which of these statements accurately describes the effective interest rate of Madeline’s credit card last ?

Answer 1

it was greater than 18.96% whether interest was compounded daily or monthly.

Explanation:

Answer 2

A. It was less than 18.96% whether interest was compounded daily or monthly.

For this case we need to find the interest compuned dauly and monthly

`i_(daily)= (18.96)/(365)=0.0519\%`

`i_(monthly)= (18.96)/(12)=1.58 \%`

So then that's the best option since both values are less than 18.96%

Explanation:

A. It was less than 18.96% whether interest was compounded daily or monthly.

For this case we need to find the interest compuned dauly and monthly

`i_(daily)= (18.96)/(365)=0.0519\%`

`i_(monthly)= (18.96)/(12)=1.58 \%`

So then that's the best option since both values are less than 18.96%

B. It was greater than 18.96% whether interest was compounded daily or monthly.

False as we can see for option A the interest rates for the compounded time monthly and daily are less than 18.96%.

C. It was greater than 18.96% if interest was compounded daily but not if interest was compounded monthly.

False for both we have values lower than 18.96%.

D. It was less than 18.96% if interest was compounded daily but not if interest was compounded monthly.

False for both we have values lower than 18.96%.