You have just received credit card applications from two banks, A and B. The int

Question

You have just received credit card applications from two banks, A and B. The interest terms on your unpaid balance are stated as follows: Bank A: 18% compounded quarterly. Bank B: 17.5% compounded daily. Which of the following statements is incorrect? The effective annual interest rate for Bank A is 19.25%. The nominal annual interest rate for Bank B is 17.5%. Bank B's term is a better deal because you will pay less interest on your unpaid balance. Bank A's term is a better deal because you will pay less interest on your unpaid balance.

Explanation / Answer

c is incorrect b is incorrect (A) effective annual interest rate can be calculated r = [ (1+i/n)^n ] - 1 the effective annual interest rate for bank A is 19.25% correct

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