Answer:
Credit card A offers better deal for the consumer.
Step-by-step explanation:
Since, the effective rate of interest is,
[tex]r=(1+\frac{i}{n})^n-1[/tex]
Where, i is the stated annual rate,
n is the number of number of compounding periods,
For card A,
i = 23.16 % = 0.2316,
n = 12, ( 1 year = 12 months )
Thus, the effective interest rate,
[tex]i_1=(1+\frac{0.2316}{12})^{12}-1[/tex]
[tex]\implies i_1=0.257836782609\approx 0.25784[/tex]
While, For card B,
i = 23.02 % = 0.2302,
n = 365, ( 1 year = 12 months )
Thus, the effective interest rate,
[tex]i_2=(1+\frac{0.2302}{365})^{365}-1[/tex]
[tex]\implies i_2=0.258760414464\approx 0.25876[/tex]
Since, 0.25784 < 0.25876
[tex]\implies i_1< i_2[/tex]
Hence, credit card A offers better deal for the consumer.
