Calculating APR and APY for Credit Cards and Loans

The Organic Chemistry Tutor

This educational video provides a detailed mathematical tutorial on calculating Annual Percentage Rate (APR) and Annual Percentage Yield (APY). Through step-by-step problem solving, the narrator demonstrates how to convert monthly periodic rates to APR and how to calculate APY using compounding formulas for both monthly and daily intervals. The video contrasts low-interest scenarios with high-interest scenarios to illustrate how compounding affects the difference between APR and APY. The content moves beyond standard credit card interest to analyze the structure of payday loans. It walks viewers through a specific real-world word problem involving a $1,000 loan with processing fees and a short repayment term. This example highlights the drastic difference between simple fees and the annualized cost of borrowing, revealing how short-term loans can have astronomical APRs exceeding 300%. This resource is highly valuable for high school financial math and algebra classrooms. It connects abstract algebraic formulas to critical real-world financial literacy concepts. Teachers can use this video to teach exponential growth, the mechanics of interest, and the importance of reading financial fine print, helping students become savvy consumers who understand the true cost of debt.