You have been offered a credit card with an interest rate of 1.5% per month.This is equivalent to and effective annual rate (EAR)of [blank].
A)12.17%
B)18.00%
C)24.00%
D)19.56%

Question

Quizplus · Accepted Answer

To find the EAR, we use the formula: EAR = (1 + APR/m)^m - 1, where APR is the annual percentage rate and m is the number of compounding periods per year. In this case, APR = 1.5% x 12 = 18% and m = 12 (since interest is compounded monthly). Plugging these values into the formula, we get: EAR = (1 + 0.18/12)^12 - 1 = 0.1956 or 19.56%. Therefore, the correct answer is D.

You Have Been Offered a Credit Card with an Interest