Question

PLEASE PLEASE PLEASE HELP ME?!
Part 1: Explain which companies would advertise APR over APY and describe how this would help them attract customers. (4 points)
Part 2: Create a unique APR (state how often the rate is compounded) and calculate the corresponding APY. Use a comparison of the two rates to verify your answer to part 1. (4 points) (8 points)

Answer 1

@satellite73

Answer 2

because the apy is larger than the apr

Answer 3

lets do an example
pick an interest rate as a precent

Answer 4

you want me to pick one?

Answer 5

yes please

Answer 6

ok i pick 6%

Answer 7

i mean APR is 6%, i.e. the "annual percentage rate" is 6%
if the interest is compounded only once a year, then you get an additions 6% of your deposit. say you deposit $100 then you get $6 for a total of $106

but the APY is different

Answer 8

if the annual percentage rate is 6% but it is compounded more frequently, then you get more money
so for example lets compound it monthly and invest the same $100
then in one year you would have
\[100(1+\frac{.06}{12})^{12}=100(1.005)^{12}=106.17\]

Answer 9

not much different, but a little larger
so if the APR is 6% then the APY is 6.17%

Answer 10

without using the $100 you can calculate the APY that example by computing
\[(1+\frac{.06}{12})^{12}-1\] and getting \(.0617\) which is \(6.17\%\)

Answer 11

how would they attract customers though?

Answer 12

because \(6.17\%\) is larger than \(6\%\)