SOLUTION: You have seen a credit card advertisement stating that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of

Question 696569: You have seen a credit card advertisement stating that the annual percentage rate is 12 percent. If the credit card requires monthly payments, what is the effective annual rate of interest on the loan?
Answer by jim_thompson5910(35256) (Show Source): You can put this solution on YOUR website!
EAR = Effective Annual Rate
i = annual interest rate
n = number of compounding periods

EAR = (1 + i/n)^n - 1

EAR = (1 + 0.12/12)^12 - 1

EAR = (1 + 0.01)^12 - 1

EAR = (1.01)^12 - 1

EAR = 1.12682503013197 - 1

EAR = 0.12682503013197

Multiply this by 100 to get 12.68%

So the effective annual rate is 12.68%
RELATED QUESTIONS
Your credit card charges interest of 1.2 percent per month. What is the annual percentage (answered by Alan3354)

you have 2,000 on a credit card that charge a 18% interest rate if you want to pay off... (answered by Theo)

How many months will it atke to pay off a credit card with a balance of of $1000 if you... (answered by ewatrrr)

The annual interest rate on a credit card is 13.99%. If the minimum payment of $20 is... (answered by pphantom)

Using information from an internet source, determine the current interest rate a credit... (answered by Alan3354)

Using information from an internet source, determine the current interest rate a credit... (answered by Boreal)

If the annual interest rate on a credit card statement is 11.96%, what is the weekly... (answered by JulietG)

If the annual interest rate on a credit card statement is 2.6%, what is the weekly... (answered by jim_thompson5910)

If the annual interest rate on a credit card statement is 62.4%, what is the weekly... (answered by Alan3354)