question 3 (10 points) merle has an offer from a credit card issuer for a 0% apr for the first 60 days and a…

Explanation:

Step1: Determine the number of days in a year

Assume a non - leap year with 365 days. The first 60 days have 0% APR, so we focus on the remaining days. The number of remaining days $n=365 - 60=305$ days.

Step2: Write the formula for effective - interest rate

The formula for the effective annual interest rate $r_{eff}$ when the annual percentage rate is $r$ compounded $m$ times a year is $r_{eff}=(1 + \frac{r}{m})^{m}-1$. Here, $r = 0.2119$ (21.19% expressed as a decimal) and $m = 365$ (compounded daily). But we need to consider the weighted - average effect. Since the first 60 days have 0% interest, we calculate the growth factor for the 305 - day period with interest and assume the principal doesn't change in the first 60 days. The growth factor for the 305 - day period is $(1+\frac{0.2119}{365})^{305}$. Let's calculate $(1+\frac{0.2119}{365})^{305}$. First, $\frac{0.2119}{365}\approx0.0005805479$. Then, $1+\frac{0.2119}{365}=1.0005805479$. $(1.0005805479)^{305}\approx1.2319$. The effective interest rate is approximately 23.19%.

Answer:

B. 23.19%