Question

What is the effective annual rate if a bank charges you an APR of 7.64 percent compounded monthly?

A. 7.79 percent

B. 7.86 percent

C. 7.91 percent

D. 7.98 percent

E. 8.01 percent

Answer 1

> Formula

> Calculation

=> Effective Rate = ( 1 + 0.0764 / 12 )12 - 1

=> Effective rate = ( 1 + 0.006367 )12 - 1

=> Effective rate = 1.07913 - 1

=> r = 0.07913 or 7.91 % Answer

> Answer

The correct answer is Option C.

Hope you understand the solution.