You are considering two ways of financing a spring break vacation. You could put it on your credit card, at 15% APR, compounded

Question

3 years ago

6

monthly, or borrow the money from your parents, who want an 8% interest payment every six months. Which is the lower rate

1 answer:

Bess [88] · Answer 1 · 2022-01-23T05:31:33+03:00

Bess [88]3 years ago

8 0

Answer:

The lower rate is when you put it into your credit card.

Explanation:

Credit card: rate = (1 + 15%/12)^12 - 1

EAR = 16.08%

Parents loan = ( 1 + 8%)^2 - 1

EAR parents = 16.64%

Therefore, The lower rate is when you put it into your credit card.