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10 July, 11:31

A credit card had an APR of 16.42% all of last year and compounded interest daily. What was the credit card's effective interest rate last year?

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  1. 10 July, 11:48
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    To calculate the effective interest rate you'll need the following formula.

    (1 + APR / n) ^n - 1 * 100.

    IT looks alot harder than it is.

    APR has to be expressed as a decimal, so 0.1642.

    n is the period. as it is daily, n=365.

    1 + (0.1642/365) to the power of 365. will give you 1.1784 ...

    Minus 1, and times by 100 to get it as a percentage = 17.84%
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