Question

Master Card and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 24.25%, with interest paid monthly. what is the card's EFF%?

a. 33.11%



b. 21.44%



c. 20.35%



d. 27.14%



e. 23.34%

Answer 1

Answer: D. 27.14%

Step-by-step explanation:

The EFF% or (Effective annual rate) is calculated thus:

Recall :

EFF% = [ (1 + (r/n))^n] - 1

Annual percentage rate (APR) = Nominal rate (r) = 24.25 % = 0.2425

Period(n) = 12 months

In outing the values :

EFF% = [ (1 + (0.2425/12))^12] - 1

EFF% = [ 1 + (1.02020833)^12] - 1

EFF% = 1.271353 - 1

EFF% = 0.271353

EFF = 0.271353 × 100

EFF = 27.14%

Answer 2

27.14%

Step-by-step explanation:

EFF ( effective annual interest rate) = ( 1 + ( rate / number of periods)^n -1 = ( 1 + ( 0.2425 / 12)^12 -1 = 0.2714 = 27.14% where rate = 24.25% and number of periods = 12 months