Answer to Question #259859 in Financial Math for Rob

Question

If you pay 1.5% per month on the out standard balance of your master card bill what effective annual rate you being charged?

Answer 1

Monthly: i = r/M

= 1.5%/12

=0.125%

Effective annual rate i _a=(1 + r/M)^M -1

Therefore; i _a =(1 + 0.000125)¹² - 1

=1.001501 - 1

=0.001501

=0.15%