Store offered you acredit card that charges interest at .95% per month compounde

Question

Store offered you acredit card that charges interest at .95% per month compoundedmonthly.
What is nominal interest(annual percentage) rate for this card?What is the effective
annaul interest rate? A) (1+.0095/12)12 -1 = .00954 = .954% B) e.0095 - 1 = .00955 = .96% Not sure if these are correct. Store offered you acredit card that charges interest at .95% per month compoundedmonthly.
What is nominal interest(annual percentage) rate for this card?What is the effective
annaul interest rate? A) (1+.0095/12)12 -1 = .00954 = .954% B) e.0095 - 1 = .00955 = .96% Not sure if these are correct.

Explanation / Answer

Credit CardMonthly Interest Rate = 0.95% Nominal Interest Rate(or) Annual Percentage Rate for this Card = 0.95% *12 = 11.4% per year Effective Annual InterestRate Calculation for this Credit Card: Effective Annual Rate(ieff) =   [(1+r/k)k - 1] r = Nominal Interest Rate (or)Annual Percentage Rate k = Times per yearcompounded ieff = Effective AnnualRate Effective Annual Rate(ieff) = [(1+0.114/12)12 -1] Effective Annual Rate(ieff) = [(1+0.0095)12 /12)12 - 1] Effective Annual Rate(ieff) = [(1.0095)12 - 1 ] Effective Annual Rate(ieff) = [1.120149216 - 1] Effective Annual Rate(ieff) = 0.12014 (or) 12.01% Effecitve Annual Rate(ieff) = 12.01% Hope it may help you Credit CardMonthly Interest Rate = 0.95% Nominal Interest Rate(or) Annual Percentage Rate for this Card = 0.95% *12 = 11.4% per year Effective Annual InterestRate Calculation for this Credit Card: Effective Annual Rate(ieff) =   [(1+r/k)k - 1] r = Nominal Interest Rate (or)Annual Percentage Rate k = Times per yearcompounded ieff = Effective AnnualRate Effective Annual Rate(ieff) = [(1+0.114/12)12 -1] Effective Annual Rate(ieff) = [(1+0.0095)12 /12)12 - 1] Effective Annual Rate(ieff) = [(1.0095)12 - 1 ] Effective Annual Rate(ieff) = [1.120149216 - 1] Effective Annual Rate(ieff) = 0.12014 (or) 12.01% Effecitve Annual Rate(ieff) = 12.01%

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