BestBank's Visa credit card discloses an A. P. R. of "Prime Rate + 5.74% to Prime Rate + 22.74%." If the Prime Rate increases from 3.25% to 4.25%, what impact would this have on A. P. Rs for cardholders?

a. No change since credit card A. P. Rs don't change as long as your account is open

b. Increase in A. P. R by 1%

c. Decrease in A. P. R. by 1%

d. Increase in A. P. R. by 22.74%

Question

Dallas Harrington

Business

4 January, 11:15

BestBank's Visa credit card discloses an A. P. R. of "Prime Rate + 5.74% to Prime Rate + 22.74%." If the Prime Rate increases from 3.25% to 4.25%, what impact would this have on A. P. Rs for cardholders?

a. No change since credit card A. P. Rs don't change as long as your account is open

b. Increase in A. P. R by 1%

c. Decrease in A. P. R. by 1%

d. Increase in A. P. R. by 22.74%

+5

Answers (1)

Know the Answer?

Riley Roberts · Answer 1

The prime rate is the base rate for any financial transaction. The prime rate is considered for each type of lending instruments by the bank. bank add a margin % over the prime rate and offer loan/instrument at the increased rate.

In the given case, the BestBank's Visa credit card discloses an A. P. R. of "Prime Rate + 5.74% to Prime Rate + 22.74%, which means the A. P. R is calculated on the basis of Prime rate and any change in prime rate will directly affect the A. P. R.

The Prime Rate has increased from 3.25% to 4.25%, it means the increase of 1%. Hence the A. P. R. Shall also increase by 1%.

Hence the correct answer is:

b. Increase in A. P. R by 1%