Question

A new credit card company released a card that charges interest at a rate of 1.85% p.m. Calculate the nominal interest rate compounded monthly for the credit card.

a.18.5%
b.22.2%
c.28.5%
d.16.2%

Answer 1

The nominal interest rate compounded monthly for a credit card with a monthly interest rate of 1.85% is 22.2%, which is calculated by multiplying the monthly rate by the number of months in a year (1.85% x 12).

Step-by-step explanation:

To calculate the nominal interest rate compounded monthly for a credit card that charges an interest rate of 1.85% per month, you would multiply the monthly rate by the number of months in a year. The calculation is straightforward:

1. Monthly interest rate: 1.85%
2. Number of months in a year: 12
3. Nominal annual interest rate: 1.85% × 12 = 22.2%
   Picking from the options provided, the correct nominal interest rate compounded monthly for this credit card is

22.2%, which corresponds to option b.