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 18.00%,with interest paid monthly,what is the card's EFF%?
A)18.58%
B)19.56%
C)20.54%
D)21.57%
E)22.65%

Question

Quizplus · Accepted Answer

The formula for calculating the EFF% is (1 + APR/n)^n - 1, where n is the number of times interest is compounded per year. Since interest is paid monthly, n = 12. Plugging in the values, we get (1 + 0.18/12)^12 - 1 = 0.1956 or 19.56%. Therefore, the correct answer is B.

Master Card and Other Credit Card Issuers Must by Law