Question

Your credit card company quotes you an interest rate of 21.9 percent based on annual compounding. Interest is billed monthly. What is the actual rate of interest you are paying

Answer 1

Answer:24.24%

Step-by-step explanation:

Effective Annual Rate = (1 + (nominal interest rate / number of compounding periods)) ^ (number of compounding periods) – 1

EAR = [1 + (.219 / 12)]12 - 1 = .2424, or 24.24 %