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If you have a credit card with 12.99% APR that compounds daily, what is the effective

interest rate?

1 Answer

9 votes

Answer: 13.87%

Step-by-step explanation:

Effective interest rate is calculated by the formula:

= (1 + APR / Number of compounding periods)) ^ Number of compounding periods - 1

Number of compounding periods = 365 days in a year

= (1 + 0.1299/365) ³⁶⁵ - 1

= 0.138688

= 13.87%

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