What is the APY on Bradley's default,or penalty,rate if it is compounded monthly?
A)33 percent
B)33.50 percent
C)38.48 percent
D)42.96 percent

Question

Quizplus · Accepted Answer

To calculate the APY, we need to use the formula: APY = (1 + (r/n))^n - 1, where r is the annual interest rate, and n is the number of times the interest is compounded in a year.

From the question, we know that Bradley's default rate is 30%, and his penalty rate is 40%. Since the penalty rate is applied when he misses a payment, we can assume that this rate will be applied at least once during the year. Therefore, we can use the penalty rate to calculate the APY.

If the penalty rate is compounded monthly, then n = 12. Plugging in the values, we get:

APY = (1 + (0.40/12))^12 - 1
APY = 0.3848 or 38.48%

Therefore, the best choice is C.

What Is the APY on Bradley's Default,or Penalty,rate If It