Monty currently has a Visa card from his bank with the following terms: 18% on purchases, 24% on cash advances with a 4% cash advance fee on the amount, and a default or penalty rate of 36%. His current statement shows a balance of $6,000. So far he has only taken one cash advance, withdrawing $1,000 from a casino in Las Vegas a year ago, which he has already paid off. Lately he has been having a hard time paying more than the minimum payment of 4% of his balance. The only assets he owns are a seven-year-old car and a $2,500 certificate of deposit that has a 5% APR.
-What is the current APY on this credit card?

Question

Quizplus · Accepted Answer

The correct answer is D. The annual percentage yield (APY) on this credit card is 19.56%. This is calculated by taking the periodic rate (18%) and multiplying it by the number of periods in a year (12), then adding 1 and raising the result to the power of the number of periods in a year (1). The result is 1.1956, which is the APY.

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