As a College Student, You Probably Receive Many Credit Card

question 76

Multiple Choice

As a college student, you probably receive many credit card offers in the mail. Consider these two offers. The first card charges a 17 percent APR. An examination of the footnotes reveals that this card compounds daily (365 day year) . The second credit card charges 18 percent APR and compounds semiannually. What is the effective annual rate of the cheaper card?

• A) 18.00 percent
• B) 17.00 percent
• C) 18.81 percent
• D) 18.53 percent

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Definitions:

Income Tax Expense

The total amount of income tax a company expects to pay to tax authorities relative to its taxable income.

Deferred Tax Asset

A financial item on a company's balance sheet representing taxes paid or carried forward that can be used to offset future tax liabilities.

Tax-Exempt Municipal

Refers to income earned from municipal bonds that is exempt from federal income tax and, in many cases, state and local taxes.

Pretax Financial Income

The amount of income a company has earned before any taxes have been deducted, often used for internal reporting.