Master Card and other credit card issuers must print the nominal annual rate (AP

Question

Master Card and other credit card issuers must print the nominal annual rate (APR) on their monthly statements. If the APR is stated as 18.55%, but interest is compounded monthly, what is the card's effective annual rate (EFF%)? Your answer should be between 16.82 and 29.74, rounded to 2 decimal places, with no special characters. D Question 18 5 pts An investment promises the following cash flow stream $1000 at Time o $2.000 at the end of Year 1 jorat t-A: $3.000 at the eno of Year 2: and $5,000 at the end of Year 3. At a discount rate stream Your answer should be between 8343.00 and 41.000.0o. rounded to 2 decimal places thino special characters

Explanation / Answer

1) APR 18.55% EAR = [(1+ APR/N)^n]-1 = [(1+(18.55%/12))^12)]-1 20.21% 2) Year Cash flow Discount rate@5.9% Present Value 0 1000 1.00000 $1,000.00 1 2000 0.94429 $1,888.57 2 3000 0.89168 $2,675.03 3 5000 0.84200 $4,210.00 Total $9,773.61

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