Question

Question Set
What is the effective rate for a credit card if it has an annual nominal rate of 15%, compounded monthly
15 97%
15 54%
16 1996
16 08%​

Answer 1

Answer:

What Is an Effective Annual Interest Rate?

The effective annual interest rate is the real return on a savings account or any interest-paying investment when the effects of compounding over time are taken into account. It also reveals the real percentage rate owed in interest on a loan, a credit card, or any other debt.

It is also called the effective interest rate, the effective rate, or the annual equivalent rate.

The Formula for Effective Annual Interest Rate Is

\begin{aligned} &Effective\ Annual\ Interest\ Rate=\left ( 1+\frac{i}{n} \right )^n-1\\ &\textbf{where:}\\ &i=\text{Nominal interest rate}\\ &n=\text{Number of periods}\\ \end{aligned}

Effective Annual Interest Rate=(1+

n

i

)

n

−1

where:

i=Nominal interest rate

n=Number of periods