Your monthly statement from your bank credit card shows that the monthly rate of interest is 1.5%. What is the effective annual rate of interest you are being charged on your credit card?
A)18.00%
B)18.64%
C)19.56%
D)29.74%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula: EAR = (1 + periodic rate)^n - 1, where n is the number of compounding periods per year. For a monthly rate of 1.5%, the EAR is (1 + 0.015)^12 - 1 = 0.1956 or 19.56%.

Your Monthly Statement from Your Bank Credit Card Shows That