apr and monthly interest

s4f8606

I know this is proberbly an often asked question but how do you convert a monthly interest rate to an APR? Is it as simple as multiplying by 12 ( 12 months per year) or is it more complicated.

Brian_Bullocks

s4f8606 wrote: »

I know this is proberbly an often asked question but how do you convert a monthly interest rate to an APR? Is it as simple as multiplying by 12 ( 12 months per year) or is it more complicated.

Nearly....

The APR is given by taking the monthly rate and multiplying it by itself 12 times. Thus:

APR = (1.01667)x(1.01667)x(1.01667)x(1.01667)x(1.01667)x (1.01667)x(1.01667)x(1.01667)x(1.01667)x(1.01667)x (1.01667)x(1.01667)x(1.01667)

= 1.21943

Then convert back to a percentage again by subtracting '1' and multiplying the result by '100'

i.e. (1.21943 - 1) x 100% = 21.9%