Youre looking to get a new credit card with an advertized 13

You\'re looking to get a new credit card with an advertized 13.99 nominal rate. What is the Effective Annual Rate of the card?

Solution

Annual Interest Rate = 13.99% compounded monthly

Effective Annual Rate = (1 + APR/n)^n - 1, where is n is number of period of compounding
Effective Annual Rate = (1 + 0.1399/12)^12 - 1
Effective Annual Rate = 1.0116583^12 - 1
Effective Annual Rate = 1.1492 - 1
Effective Annual Rate = 0.1492
Effective Annual Rate = 14.92%