Bart opened a credit card at a department store with a APR of 19.99% compounded monthly.what is the APY on this credit card?

Question

Juice12231 · Answer

A.39.98%
B.26.81%
C.21.93%
D.1.67%

jimthompson5910 · Answer

The formula you use is
$\large \text{APY} = \left(1 + \frac{\text{APR}}{n}\right)^{n}-1$
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Here's a similar example: You apply for a credit card that has 24% APR and it's compounded monthly. What is the APY?

APR = 24% = 0.24
We compound monthly, so the money is compounded n = 12 times a year

$\large \text{APY} = \left(1 + \frac{\text{APR}}{n}\right)^{n}-1$

$\large \text{APY} = \left(1 + \frac{\text{0.24}}{12}\right)^{12}-1$ Note how I'm using the decimal form of 24%

$\large \text{APY} = \left(1 + 0.02\right)^{12}-1$

$\large \text{APY} = \left(1.02\right)^{12}-1$

$\large \text{APY} \approx 1.26824179 -1$

$\large \text{APY} \approx 0.26824179$

$\large \text{APY} \approx 0.2682$

$\large \text{APY} \approx 26.82\%$ This isn't the answer to your question as it's just an example of course.

Use these steps to find the APY when APR = 19.99%