Question

Attempts: Score: 1 29. Chapter MC, Sections, Problem 135 stated to be 24 50%, with interest paid Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the AP monthly, what is the card's

Answer 1

We can calculate the Effective annual rate of credit card with following equation :

$EAR = (1+\frac{APR}{n})^n-1$

where,

n = no. compounding period in a year.

here, interest paid monthly thus, n = 12

putting the values :

$EAR = (1+\frac{0.2450}{12})^{12}-1$

$EAR = (1.020416666666)^{12}-1$

$EAR = 1.2744726527-1$

$EAR = 0.2744726527$

$\bg_green \large EAR = 27.45\%$

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.