A credit card has an interest rate of 18% p.a. and charges interest monthly. The effective rate on this card is: Group of answer choices 11.96% p.a. 18% per month 12.18% p.a. 18% p.a. compounded annually 19.56% p.a.
Added by John S.
Step 1
a.) is the nominal rate, which is the rate before taking into account compounding. Since the interest is compounded monthly, we need to calculate the effective annual rate (EAR), which takes into account the effects of compounding. The formula to calculate the Show more…
Show all steps
Your feedback will help us improve your experience
Donna Densmore and 75 other Financial Algebra educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
A credit card offers a borrowing rate of 18%, compounded daily. What is the effective rate?
Ahmed M.
A credit card offers a borrowing rate of 18% compounded daily. What is the effective rate? (enter as decimal)
Megha S.
Jason has a Visa credit card and the Annual Percentage Rate is 18%, what is the rate he will be charged interest on per month? A . 1.5% B . 1% C . 1.8% D . 18%
Sanchit J.
Recommended Textbooks
Mathematics for Finance An Introduction to Financial Engineering
Universe: Solar System, Stars, and Galaxies
The Mathematics of Financial Derivatives: A Student Introduction
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD