Question

You are considering two ways of financing a spring break vacation. You could put it on your credit​ card, at 12% ​APR, compounded​ monthly, or borrow the money from your​ parents, who want an interest payment of 8% every six months. Which is the lower​ rate?

Answer 1

Putting the credit card for 12% of annual percentage rate which has been compounded monthly is a better rate than getting financed by the money of the parent with the interest payment of 8% for every six months because getting finance by the parents money for every 6 months is having effective interest rate of 17% where has putting the credit card for compounding monthly is just costing 12.6 8% so I would be opting for credit card annual percentage rate of 12.68%

Lower rate is putting credit card at 12% annual percentage rate.