Question

Travis just got a new credit card that offers an introductory APR of 3.6% for the first 3 months and a standard APR of 14.4% thereafter. If interest is compounded monthly, what is the periodic interest rate during the first 3 months?. A.1.6%. B.1.2%. C.0.3%. D.0.4%.

Answer 1

(C) 0.3 %

Explanation:

APR (Annual percentage rate) for first 3 months = 3.6%

APR for remaining 9 months = 14.4%

Formula for periodic interest rate = APR/n

where APR is the annual percentage rate and

n = no. of times the payment is to be made in a year

For calculating periodic interest rate for first 3 months, APR = 3.6%

n = 12 ( Since the interest is compounded monthly)

Periodic interest rate = 3.6/12

= 0.3%

Hence (C) is the correct answer.

Answer 2

According to the information given above the introductory APR is going to be lower than this established in the first time. So you need to choose the lower rate from these options, and that's obviously C.0.3%