Use the information for the question(s)below.
Your firm needs to invest in a new delivery truck.The life expectancy of the delivery truck is five years.You can purchase a new delivery truck for an upfront cost of $200,000,or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month).Your firm can borrow at 6% APR with quarterly compounding.
-The effective annual rate for a credit card that charges a 19.9% APR compounded daily is closest to:
A)18.15%.
B)19.90%.
C)22.01%.
D)24.20%.

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + i/n)^(n*t) - 1, where i is the nominal rate (APR), n is the number of compounding periods per year, and t is the number of years. For a 19.9% APR compounded daily, n = 365. EAR = (1 + 0.199/365)^(365) - 1 ≈ 22.01%.

Use the Information for the Question(s)below