A credit card company charges a nominal rate of 2% per month.
If a customer has purchased $100 worth of goods on his credit, calculate the amount she will
owe after one year, and also the annual percentage rate (APR)
Amount owed after 12 months = P (1 + r)n
= 100 (1.02)12
=$126.82
APR = actual interest over the year =
26.82 × 10%/100
× 100% = 26.82%
Mr John, I have watched your free lecture notes.
Are you saying nominal rate is an amount earned($126,82) after intrest charges while effective intrest rate Is a rate earned(26.82%)? I am failing to differentiate the nominal rate and the effective rate.
Ask the Tutor ACCA MA
Intrest rate
8y ago#1The nominal rate is the rate quote, which is 2% per month.
The effective annual interest rate is 26.82%
(Rates are always %'s. 126.82 is not a rate)
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