In: Finance
You have been offered a credit card that charges an interest rate of 9% per semiannual period. By regulation, they must disclose (in the fine print) an APR to their customers. What is the APR they disclose and what is their EAR?
APR=9% per semi annual period*2 periods
=18%
EAR=[(1+APR/m)^m]-1
where m=compounding periods
=[(1+0.09)^2]-1
=18.81%