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    Effective annual interest rate

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    Your credit card agreement states that interest on any outstanding balance is computed monthly and at a rate of 1.25% on the outstanding balance. What is the effective annual interest rate on this credit card account?

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    Effective annual rate takes into account the compounding. Here the interest rate is 1.25% on a monthly basis, implies that the ...

    Solution Summary

    The solution explains how to calculate the effective annual interest rate for a credit card account are determined.