A credit card issued through Frost Bank has a nominal interest rate of 3.5% per quarter,...
A credit card issued through Frost Bank has a nominal interest rate of 3.5% per quarter, and the compounding period is quarterly. Calculate the effective interest rate on a (a) semiannual basis, and (b) annual basis
Homework Answers
Yearly nominal rate =3.5%*4 =14%
a) Effective interest rate on semiannual basis:-
=(1+14%/2)^2-1
=14.49%
b) Effective interest rate on annual basis:-
=14%
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