Vakifbank has recently sent me an SMS message telling that their monthly interest rate for unpaid credit card balances is increased to 1

Economics Dec 03, 2020

Vakifbank has recently sent me an SMS message telling that their monthly interest rate for unpaid credit card balances is increased to 1.57526%. Which one of the following value is closest to the effective interest rate per year? Select one: O a % 20.63001 ob. % 15.51875 c. % 9.83169 d. % 22.42064 e. 18.23964

Expert Solution

Monthly interest rate = 1.57526%

Annual effective rate of interest: {[1 + Monthly rate of Interest]^^{Number of times it is compounded in an year} - 1} * 100 = {[1 + 1.57526%]^¹² - 1} * 100 = 20.63001%

Option A is correct.

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