Question

A credit card had an APR of 11.91% all of last year and compounded interest daily. What was the credit card's effective interest rate last year?

Answer 1

Solution:- For credit card, there is interest rate for borrowing money from the bank.  

and that interest rate is termed as yearly rate which is known as annual percentage rate (APR).

Now for the given question APR of a credit card i= 11.91%

and compounded interest daily so, n=365 days

Now for effective interest rate $r=(1+\frac{i}{n}^n)-1$

$r=(1+\frac{0.1191}{365})^{365}-1 \\\Rightarrow\ r=(1+0.0003)^{365}-1\\\\\Rightarrow\ r=(1.0003)^{365}-1=1.1238-1=0.1238$

=12.38%

So, the effective interest for last interest is 12.38%

Answer 2

Answer:The correct answer for APEX is 12.64%

Hope this helps :)

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