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A credit card issuer offers an APR of 19.94% and compounds interest monthly. Find the effective interest rate and explain which the card issuer is mostly likely to advertise, it…

A credit card issuer offers an APR of 19.94% and compounds interest monthly. Find the effective interest rate and explain which the card issuer is mostly likely to advertise, it…
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A credit card issuer offers an APR of 19.94% and compounds interest monthly. Find the effective interest rate and explain which the card issuer is mostly likely to advertise, its APR or its effective interest rate?

User Schmalls
by
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1 Answer

5 votes

((1+0.1994/12)^12)-1 = 21.87% effective rate

it would advertise the APR because it is lower

User Rakesh KR
by
8.5k points
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