Explain which companies would advertise APR over APY and describe how this would help them attract customers.
Credit card companies would advertise annual percentage rate.
Savings accounts would advertise annual percentage yield.
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Some companies, especially those in the financial sector, may choose to advertise APR (Annual Percentage Rate) instead of APY (Annual Percentage Yield). This decision is typically based on the nature of the product or service being offered and the target market.
Companies that offer loans or credit-related products often prefer to advertise APR because it represents the true cost of borrowing, including interest and other fees. APR takes into account the interest rate charged on the loan as well as any additional costs associated with it, such as origination fees or closing costs. This allows customers to compare different loan options and make better-informed decisions.
By providing APR information in their advertisements, these companies can attract customers who are interested in understanding the total cost of borrowing. This transparency builds trust and shows that the company is interested in helping customers make informed financial decisions. Moreover, by highlighting competitive or lower APR rates, these companies can position themselves as offering attractive loan options with favorable terms.
On the other hand, companies that offer savings accounts, certificates of deposit (CDs), or other interest-bearing accounts may choose to advertise APY. APY represents the effective annual interest rate that takes into account the compounding of interest over a specific period, such as a year. It reflects the total earnings on an investment, including both principal and interest.
By advertising APY, these companies can attract customers who are interested in maximizing their savings or investments. APY allows customers to compare different savings account or investment options and identify those that offer higher returns. This can be particularly appealing to individuals or businesses looking to grow their wealth over time.
Overall, the choice between advertising APR or APY depends on the type of financial product or service being offered and the specific needs and preferences of the target market. By using the appropriate metric, companies can effectively communicate the benefits of their offerings and attract customers who are interested in those specific aspects.
This for 2020 Quiz Finance Charges (Aquanr)
1.D
2.D
3.C
4.A
5.B
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