Question

What is the effective annual rate if your credit card charges you 10.64 percent compounded daily? (Assume a 365- day year)

O 10.79%
O 11.22%
O 11.95%
O 11.48%
O 12.01%

Answer 1

The effective annual rate is approximately 11.22%.

Step-by-step explanation:

To calculate the effective annual rate when the credit card charges a percentage compounded daily, we can use the formula:

Effective Annual Rate = (1 + (nominal rate / number of compounding periods per year))^number of compounding periods per year - 1

Given that the credit card charges 10.64 percent compounded daily, we have:

Nominal rate = 10.64%

Number of compounding periods per year = 365

Substituting these values into the formula, we get:

Effective Annual Rate = (1 + (10.64% / 365))^365 - 1

Calculating this equation gives us approximately 11.22%. Therefore, the effective annual rate is 11.22%.