You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as follows:1. Bank A: 20% compounded quarterly.2. Bank B: 19.5% compounded daily.Which of the following statements is incorrec1?(a) The effective annual interest rate for Bank A is 18.25%.(b)The nominal annual interest rate for Bank Bis 19.5%.(c) Bank B's term is a better deal because you will pay less interest on yourunpaid balance.(d) Bank A's term is a better deal because you will pay less interest on yourunpaid balance.
You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as follows:1. Bank A: 20% compounded quarterly.2. Bank B: 19.5% compounded daily.Which of the following statements is incorrec1?(a) The effective annual interest rate for Bank A is 18.25%.(b)The nominal annual interest rate for Bank Bis 19.5%.(c) Bank B's term is a better deal because you will pay less interest on yourunpaid balance.(d) Bank A's term is a better deal because you will pay less interest on yourunpaid balance.
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 3STP
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You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as follows:
1. Bank A: 20% compounded quarterly.
2. Bank B: 19.5% compounded daily.
Which of the following statements is incorrec1?
(a) The effective annual interest rate for Bank A is 18.25%.
(b)The nominal annual interest rate for Bank Bis 19.5%.
(c) Bank B's term is a better deal because you will pay less interest on your
unpaid balance.
(d) Bank A's term is a better deal because you will pay less interest on your
unpaid balance.
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