As a College Student, You Probably Receive Many Credit Card

question 67

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% APR. An examination of the footnotes reveals that this card compounds daily (365 day year) . The second credit card charges 18% APR and compounds semiannually. What is the effective annual rate of the cheaper card?

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

Identify the terms and implications of using promissory notes in transactions.

Distinguish between various methods of handling accounts receivable, including aging, factoring, and pledging.

Apply the expense recognition principle in the context of accounting for bad debts.

Recognize the materiality constraint and its application in financial accounting.

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Definitions:

Z-scores

A statistical measurement of a score’s relationship to the mean in a group of scores, indicating how many standard deviations an element is from the mean.

Standard Normal Distribution

A probability distribution that has a mean of zero and a standard deviation of one, commonly represented in statistics.

Less Than

A mathematical comparison indicating that one value is smaller than another.

Z-scores

Scores that are normalized to show the number of standard deviations a data point is away from the average.