Question

The mens warehouse charges 1.60% interet per monty on its credit cards. What effective annual rate is credit customers are actually paying?

a. 19.31%
b. 20.98%
c. 19.20%
d. 722.84%

Answer 1

i= 0.2098 = 20.98%

Step-by-step explanation:

Giving the following information:

Monthly rate (i)= 1.60% = 0.016

Number of periods (n)= 12 months

To calculate the annual real interest rate, we need to use the following formula:

i= [(1+i)^n] - 1

i= [(1 + 0.016)^12] - 1

i= 1.2098 - 1

i= 0.2098 = 20.98%