Your credit card has a quoted rate of 17% compounded weekly.What is the effective annual rate?
A)884%
B)18.50%
C)32.69%
D)17.00%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula EAR = (1 + i/n)^(n*1) - 1, where i is the annual interest rate and n is the number of compounding periods per year. For a 17% rate compounded weekly, i = 0.17 and n = 52. Plugging these into the formula gives EAR = (1 + 0.17/52)^(52*1) - 1 ≈ 0.1850 or 18.50%.

Your Credit Card Has a Quoted Rate of 17% Compounded