Question

Using a calculator and the formula, calculate the APR. Choose the correct answer. Sam Seller offers credit at 16% interest per year.

Answer 1

R=(1+i/m)^m)-1=(1+0.16÷12)^(12))-1)*100=17.23%

Answer 2

The APR is approximately 17.23 %.

Explanation:

Since, the APR is,

`r=(1+(i)/(n))^n-1`

Where, i is the nominal rate,

n is the number of periods,

Since, For a credit card, n = 12,

Here, i = 16 % = 0.16,

Thus, the APR would be,

`r=(1+(0.16)/(12))^(12)-1`

`=0.172270798259`

`=17.2270798259\%`

`\approx 17.23\%`