A credit card issuer offers an APR of 13.64% and compounds interest daily. which is it most likely to advertise, its APR or its
effective interest rate? A. it's APR, because it's 0.97% less than its effective interest rate. B. it's APR, because it's 0.97% greater than the effective interest rate. C. it's effective interest rate, because it's 0.97% less than the APR
To find the effective interest rate the formula is R=(1+r/k)^(k)-1 R=? r=nominal Interest rate 0.1364 K=compounded daily 365 Plug in the formula R=(1+0.1364÷365)^(365)−1 R=0.1461 This the effective interest rate 14.61% As you can see that the effective interest rate is greater than the nominal interest rate by 0.1461−0.1364=0.0097×100=0.97%
