A credit card had an APR of 11.91% all of last year and compounded interest daily. What was the credit card's effective interest rate last year?

Question

Leanna Snow

Mathematics

30 July, 07:53

A credit card had an APR of 11.91% all of last year and compounded interest daily. What was the credit card's effective interest rate last year?

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Answers (1)

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Azaria Baxter · Answer 1

A. Since the APR is 15.21%, to calculate the effective interest rate you use this

(1+APR/n) ^n - 1, where n is the number of times interest is compounded in a year.

In this case n = 365, so you get (1+APR/n) ^n - 1 = (1+.1521/365) ^365 - 1 =.1642 = 16.42%