Question

A credit card has an annual interest rate of 27% with daily compounding. What is the...

A credit card has an annual interest rate of 27% with daily compounding. What is the EAR?

Homework Answers

Answer #1

Number of days in a year = 365 days so if interest is compounded daily ,we will use n= 365days

EAR = [1+APR/n]^n   -1

        =[1+ .27/365 ]^365    -1

         =[1+ .0007397]^365   -1

         =[1.0007397]^365   -1

         = 1.3098 -1

         = .309821 or 30.9821% (rounded to 30.98%)

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