4]
a]
APR = monthly rate *12 = 1.45% * 12 = 17.40%
EAR = (1 + (APR / n))n - 1, where n = number of compounding periods per year. In this case, this is 12, as the rate is compounded monthly.
EAR = (1 + (APR / n))n - 1
EAR = (1 + (17.40% / 12))12 - 1
EAR = 18.86%
b]
New APR = daily rate * 365 = 0.0475% * 365 = 17.3375%
The new APR is lower than old APR.
EAR = (1 + (APR / n))n - 1, where n = number of compounding periods per year. In this case, this is 365, as the rate is compounded daily.
EAR = (1 + (APR / n))n - 1
EAR = (1 + (17.3375% / 365))365 - 1
EAR = 18.9263%
The new EAR is higher than the old EAR
I do not agree with the credit card company. I am worse off as the new EAR is higher than the old EAR
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