Question

If your credit card charges an EAR of 12%, what is the APR charged for an...

If your credit card charges an EAR of 12%, what is the APR charged for an outstanding balance?

***please show me the associated formulas and method, i know the answer is 11.39%***

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Homework Answers

Answer #1

Credit card charged EAR = 12%

Calculating the APR compounded monthly as credit card takes monthly compounding:-

Where,

r = Interest rate or APR

m = no of times compounding in a year = 12 (compounded monthly)

EAR = 12%

Taking 12-root on both sides,

1.00948879 = (1+ r/12)

1.00948879 - 1 = r/12

r = 11.3865%

So, the APR is 11.39%

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