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6 September, 01:21

A credit card company advertises an APR of 15.3% compounded daily. What is the effective interest rate? Round your answer to two decimal places.

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  1. 6 September, 04:04
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    Answer: 16.53%

    Explanation:

    Given the following:

    Annual percentage rate (r) = 15. 3% = 0.153

    n = number of compounding periods in a year

    p = number of compounding periods rate is required for

    Number of days in a year = 365 = n

    p = 365

    Effective interest rate (E) is given as:

    E = [ (1 + (r / n)) ^p] - 1

    E = [ (1 + (0.153 / 365)) ^365] - 1

    E = [ (1 + 0.0004191) ^365] - 1

    E = [1.0004191^365] - 1

    E = 1.1652876 - 1

    E = 0.1652876

    Effective Interest rate = (0.1652876 * 100) %

    Effective interest rate = 16.53%
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