Question

Which of the following inequalities is true for the annual percentage rate (APR) and the annual...

Which of the following inequalities is true for the annual percentage rate (APR) and the annual percentage yield (APY)?

APY<APR

APY>APR

APY <= APR

APY >= APR

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Homework Answers

Answer #1
  • Option d is true.
  • APY >= APR
  • Annual percentage rate (APR) is calculated using simple interest formula. Annual percentage yield (APY) is calculated using compound interest formula. Due to this reason, APY will never be less than APR.
  • When the APY is calculated with an interest compounding annually, APY may equal APR. If the interest is compounding more than once a year, then the value of APY will be greater than the value of APR.
  • Lenders use annual percentage rate (APR), whereas borrowers use annual percentage yield (APY). This can be seen while borrowing and lending loans, credit cards etc.
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