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ratelena [41]
4 years ago
8

Suppose your credit card issuer states that it charges a 15.00% nominal annual rate, but you must make monthly payments, which a

mounts to monthly compounding. What is the effective annual rate

Business
1 answer:
lubasha [3.4K]4 years ago
3 0

Answer: 16.08%

Explanation:

The effective annual interest rate simply means the interest rate on a loan that is restated from nominal interest rate.

In the above question, we are informed that it uses 15.00% as the nominal annual rate make monthly payments.

Effective annual rate = (1 + r/m)^m - 1

where,

r = annual nominal interest rate

m = number of compounding periods for the year.

In this case m= 12 since there are 12 months in a year.

The answer has been attached.

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