Answer:
16.16%
Explanation:
Given that:
A credit card issuer states that it charges a 15.00% nominal annual rate = 0.15
And which you must make weekly payments i.e weekly compounding, Therefore, there are 52 periods in a year.
The Effective annual rate (EAR) can be calculated by the formula;
[tex](EAR) = (1+\frac{annual rate}{number of periods})^{number of periods} -1[/tex]
= [tex](1+\frac{0.15}{12})^{52} -1[/tex]
∴ we have;
= (1 + 0.002885)⁵² - 1
= (1.002885)⁵² - 1
= 1.16160656 - 1
= 0.16160656
= 16.160656 %
≅ 16.16 %
∴ The effective annual rate (EAR) = 16.16%
