Question

Harold opened a credit card at a department store with an APR of 14.55% compounded monthly. What is the APY on this credit card?

Answer 1

the APY on this credit card is 15.56%

Explanation:

The computation of the APY is as followS:

The nominal monthly rate is

= 0.1455 ÷ 12

= 0.012125

Now

real annual rate= [(1 + Nominal monthly rate)^number of months] - 1

= [(1.0.12125^12) - 1]

= 15.56%

Hence, the APY on this credit card is 15.56%

The same is considered by applying the given formula