Question

You get an offer for a credit card that charges 13.99% interest APR, compounded monthly. What effective annual interest rate does this credit card charge?

Answer 1

14.9228% effective annual interest rate does this credit card charge.

What is interest?

Interest is the fee you charge for lending money or the expense of borrowing it. The actual amount plus interest must be paid, plus a percentage.

The annual interest rate formula is

EAR=(1+r/m)m−1

r = interest

m = monthly

EAR= (1+13.99% / 12)12−1

EAR= (1+0.139912)12−1

EAR = 0.149228

EAR = 14.9228%

Hence, the significance of the interest is aforementioned.

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