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  1. business
  2. accounting
  3. your credit card offers you a promotional apr of 2

Your credit card offers you a promotional APR of 29% per year, which of course...

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Accounting

Your credit card offers you a promotional APR of 29% per year, which of course involves monthly compounding (it is in the tiny letters). Lets see if we learned something this week: suppose that you have a balance of $1,000.
1. What is the monthly interest rate that you are charged?
2. If you do not pay your credit card at all for a year, what would be the ending balance
(remember, monthly compounding)? What is the holding period return for the bank (or the
actual cost to you)?
3. What is the effective annual rate of your credit card?

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