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19 February, 12:50

American Express and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18.00%, with interest paid monthly, what is the card's EFF%

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  1. 19 February, 13:40
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    Answer: 19.56%

    Explanation:

    Effective Rate of Return is the rate that takes into account, the compounding influence of interest rates in a given period.

    It is calculated with the formula,

    = (1 + r/n) ^ n - 1

    Where

    r = APR

    n = no of compounding periods in a year

    Interest is paid monthly so nnumber of periods will be 12.

    Therefore,

    EFF = (1 + 18%/12) ¹² - 1

    EFF = 19.56%
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Home » Business » American Express and other credit card issuers must by law print the Annual Percentage Rate (APR) on their monthly statements. If the APR is stated to be 18.00%, with interest paid monthly, what is the card's EFF%
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