Bradley currently has a Visa card from his bank with the following terms: 21 percent on purchases, 25 percent on cash advances with a 3 percent cash-advance fee on the amount, and a default or penalty rate of 33 percent. His current statement shows a balance of $9,000. Lately, he has been having a hard time paying more than the minimum payment of 3 percent of his balance.
-What is the APY on Bradley's default,or penalty,rate?

Question

Quizplus · Accepted Answer

To calculate the APY on the default rate, we need to add the periodic interest rate (33%/12) to 1 and raise the result to the 12th power (since there are 12 months in a year). This gives us an APY of 38.48%. Option A is incorrect because it is only the stated default rate. Options B and D are also incorrect as they are higher than the calculated APY for the default rate.

Bradley Currently Has a Visa Card from His Bank with the Following