Question

What do I put in the boxes if the answer is 1.74%?

Answer 1

If a credit card advertises an annual interest rate of 23%, then the equivalent monthly interest rate is 1.74%

The annual interest rate = 23%

The credit card interest rate the amount you have to pay to borrow the money from them.  The credit card interest rate is usually expressed in yearly rate. This is called annual percentage rate.

The monthly interest rate = $(1+\frac{23}{100})^{(1/12)}$

= $(1+0.23)^{(1/12)}$

= 1.0174

Then,

= (1.0174-1) × 100%

Subtract the terms first

= 0.0174 × 100%

Multiply it

= 1.74%

Hence, if a credit card advertises an annual interest rate of 23%, then the equivalent monthly interest rate is 1.74%

Learn more about annual percentage rate here

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