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: 19.56%. The annual percentage yield (APY) is the effective interest rate that takes into account the effect of compounding. The APY for this credit card is calculated as follows:APY = (1 + (APR / 12))^12 - 1= (1 + (0.18 / 12))^12 - 1= 0.1956 or 19.56%

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