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American Express charges it’s customers 1.892% per month. Find the nominal and effective rate?

American Express charges it’s customers 1.892% per month. Find the nominal and effective rate?

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Answer #1

Interest rate = 1.892% per month

1 Effective Annual interest rate = (1 + interest rate) ^n - 1

= (1 + 1.892%)^1*12    - 1

= (1.01892)^1*12 – 1

= 1.252221174225559065632750306602 - 1

= 25.22 %

2 Nominal Interest rate = interest rate per month * 12

= 1.892 * 12

= 22.704 %

                                         

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