You are paying an EAR of 16.78 percent on your credit card. The interest is compounded monthly. What is the annual percentage rate on this account?

Question

Quizplus · Accepted Answer

The APR can be calculated from the EAR using the formula: APR = (1 + EAR)^(1/n) - 1, where n is the number of compounding periods per year. In this case, EAR is 16.78% or 0.1678, and n is 12 (monthly compounding). So, APR = (1 + 0.1678)^(1/12) - 1, which approximately equals 0.1561 or 15.61 percent.

You Are Paying an EAR of 16