If the effective annual interest rate is known to be 16.0% on a debt that has monthly payments,what is the annual percentage rate?
A) 16.00%
B) 14.93%
C) 12.45%
D) 1.33%

Question

Quizplus · Accepted Answer

The formula to convert the effective annual interest rate (EAR) to annual percentage rate (APR) is:

APR = (1 + EAR/12)^12 - 1

Substituting the given values,

APR = (1 + 0.16/12)^12 - 1 = 0.1493 or 14.93% (rounded to two decimal places)

Hence, the correct choice is B.

If the Effective Annual Interest Rate Is Known to Be