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 19.25%,with interest paid monthly,what is the card's EFF%?

Question

Quizplus · Accepted Answer

To calculate the EFF% (Effective Annual Interest Rate), we can use the following formula: EFF% = (1 + i/m)^m - 1, where i is the stated APR and m is the number of times interest is compounded per year. In this case, interest is paid monthly, so m = 12. Plugging in the values, we get: EFF% = (1 + 0.1925/12)^12 - 1 = 0.2104 or 21.04%. Therefore, the correct answer is A.

Master Card and Other Credit Card Issuers Must by Law