00:01
When i see effective interest rate, all i think of, i was right, rate, i just think about, well, what happens if your p value is one and the t value equals one? and one on earth am i talking about is in the formula that's a equals p times 1 plus r over n to the nt power.
00:24
And the way i think about is if p equals 1, 1 times anything is just that thing.
00:28
And if t equals 1, you get the effective rate after one year.
00:33
So the trick to this problem is that you know it's monthly.
00:37
So therefore, n equals 12.
00:40
And then the last thing is they tell you that it's a 48%.
00:44
Holy cow.
00:46
So r equals 48%.
00:49
Well, the word percent means out of 100.
00:53
So it makes sense to move the decimal over twice.
00:56
So the exact answer is 1 plus 0 .48 divided by 12 to the 12th power...