Question

4. Emery opened a credit card at a department store with an APR of 16.82% compounded quarterly. What is the APY on this credit card? (2 points)

33.64%
63.93%
4.21%
17.91%

Answer 1

APY is 17.91%

Explanation:

APR and APY both are the annual rate of interest, among that APY takes the compounding value into the account. So to find APY , we can consider a thing bought for $ 100 and an year contains 4 quarters.

So to find APY we can write as,

For the first quarter:

$ 100 × 16.82% / 4 = $ 4.205 rounded to $4.2

Now $100 is added to $ 4.2, we will get $ 104.2.

For the second quarter:

$ 104.2 × 16.82% / 4 = 4.381 ≈ $ 4.4

For the third quarter:

$ 108.6 × 16.82% / 4= $ 4.6

For the fourth quarter:

$ 113.2 × 16.82% / 4 = $4.8

$ 113.2 + $4.8 = $ 118

So APY on this credit card is 17.91%