Question

I need formula in excel please: Thank you You are deciding between three credit cards:
Credit card 1 has an APR of 19% and compounds monthly.
Credit card 2 has an APR of 19% but compounds weekly.
Credit card 3 has an APR of 18.9% and compounds daily.
Rank the three cards on the basis of their EAIR.
Which credit card would you choose?

Answer 1

excel formula to find effective rate=EFFECT(nominal_rate,npery)

npery means number of periods in a year

Credit card 1 has an APR of 19% and compounds monthly, so EAR=EFFECT(nominal_rate,npery)=EFFECT(19%,12)=20.75%

Credit card 2 has an APR of 19% but compounds weekly, so EAR=EFFECT(nominal_rate,npery)=EFFECT(19%,52)=20.88%

Credit card 3 has an APR of 18.9% and compounds daily,so EAR=EFFECT(nominal_rate,npery)=EFFECT(18.9%,365)=20.80%

first rank Credit card 1 has an APR of 19% and compounds monthly

second rank Credit card 3 has an APR of 18.9% and compounds daily

third rank Credit card 2 has an APR of 19% but compounds weekly

the above are answers.